Question

Assume a mutual fund owns 2,500 shares of Goldman Sachs, trading at $66.25, 1,500 shares of Amazon, currently trading at $61.75, and 2,000 shares of Apple, trading at $18.50 on day 1. The mutual fund has no liabilities and 15,000 shares outstanding held by investors.

a. What is the NAV of the fund?

b. Calculate the change in the NAV of the fund if the next day Goldman Sachs’ shares increase to $69, Amazon’s shares increase to $65, and Pfizer’s shares decrease to $15.50.

c. Assume that on Day 1, 750 additional investors buy one share each of the mutual fund at the NAV obtained in part a) equal to $Y. This means that the fund manager has 750 * Y additional funds to invest. The fund manager decides to use these additional funds to buy additional shares in Amazon. Calculate next day’s NAV given the same rise in share values as calculated in part b.

Answer 1

A
	Day 1				Share outstandings	15000
		Shares held	Price	Value
	Gold sachs	2500	66.25	165625
	Amazon	1500	61.75	92625
	Apple	2000	18.50	37000
			Total Value	295250.00
			NAV	19.68333333
B
	Day 2				Share outstandings	15000
		Shares held	Price	value
	Gold sachs	2500	69	172500
	Amazon	1500	65	97500
	Apple	2000	15.50	31000
			Total Value	301000
			NAV	20.06666667
C
	Fund mageger has new fund @19.6833 For 750 shares
	Fund received	14762.5
	No. of Amazon shares purchased	239.0688259
				i.e. 239 share approx
	Day 2				Share outstandings	15750
		Shares held	Price	value
	Gold sachs	2500	69	172500
	Amazon	1739	65	113035
	Apple	2000	15.50	31000
			Total Value	316535
			NAV	20.09746032