Critically evaluate NAV of a Mutual fund.

Solutions

Expert Solution

NAV Is value of one unit of mutual fund. It is the price at which one can buy unit of mutual fund. In otherwords it reflects the composite price of all the asset held by mutual fund. Simply put if asset held by mutual fund rises so thus the NAV if it falls NAV will fall. It is compulsory for mutual fund to declare value of NAV on daily basis
For example if one want to invest 10,000$ in mutual fund having NAV of 200 then he will receive 50 units of that fund.
It is important to note that as oppose to stock , dividend are declared on per unit basis. ie 5 $ per unit

NAV is calculated as follows

NAV (Net Asset value) = Asset less liability/ no. of units

Asset of mutual fund are mainly stocks and liquid cash.Debts include money owed for outstanding liabilities and expenses. All accrued expenses are included in this
Thus higher NAV only shows that the mutual fund has performed well but it does not reflect future prospect of the fund

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Last year, you invested $90,000 into Jones mutual fund. The fund had a NAV of $45...

Last year, you invested $90,000 into Jones mutual fund. The fund had a NAV of $45 when you opened your account. Jones fund charges a 3% front end load and a 2% back end load. During the course of the year, the fund paid $5/share in distributions, which you fully reinvested in the fund by purchasing new shares at a price of $44/share. The fund currently has a NAV of $48. How many shares did you buy when you opened...

How is the net asset value (NAV) of a mutual fund determined? What is meant by...

How is the net asset value (NAV) of a mutual fund determined? What is meant by the term marked-to-market daily?please explain with calculation

Linard wants to buy shares in a mutual fund. The current NAV is $44.18. He looks...

Linard wants to buy shares in a mutual fund. The current NAV is $44.18. He looks up fund characteristics on Robinhood and found the following: Operating Expenses: 1.10%, Front-end loan: 0.80%, back-end loan (if exiting after one year): 1.70%, and 12b-1 fees of 0.10%. What would be his rate of return if he buys this fund today and sells after one year if the fund returns 15% over this period?

Mutual fund cost: Dividends = $3.00, capital gains distribution = $1.50, increase in NAV from $44.60...

Mutual fund cost: Dividends = $3.00, capital gains distribution = $1.50, increase in NAV from $44.60 to $46.60. A. What is percent return with no load? B. What is percent return with a 4% load?

Evaluate which fund structure (alternative mutual fund or hedge fund) you would choose for FIM. Your...

Evaluate which fund structure (alternative mutual fund or hedge fund) you would choose for FIM. Your answer should briefly describe the advantages and disadvantages of each structure.

A closed-end fund starts the year with a NAV of $12.55. By year-end, NAV equals $11.36....

A closed-end fund starts the year with a NAV of $12.55. By year-end, NAV equals $11.36. At the beginning of the year, the fund was selling at a 5% discount to NAV. By the end of the year, the fund is selling at a 1% premium to NAV. The fund paid year-end distributions of income and capital gains of $1.21. What is the rate of return to an investor in the fund during the year? Round your answer to 4...

Critically evaluate the VRIO framework.

how a mutual fund is structured. Make sure to explain why mutual fund fee's may or...

how a mutual fund is structured. Make sure to explain why mutual fund fee's may or may not be worth the cost to you. Comment on why you might want to invest in a mutual fund instead of a good stock. Do not take any short cuts answering this question this week, I want detail. This is the investment tool that most individuals use. The companies provide detailed information for you to review every month. There are many types of...

What is a hedge fund and how is it different from a mutual fund?

Assume that different equity mutual fund managers have different skills. Some mutual fund managers are talented...

Assume that different equity mutual fund managers have different skills. Some mutual fund managers are talented and are good stock pickers. If this is true, why might we still expect in the long run that the funds these talented fund managers work for do not earn persistent abnormal high returns?

Subjects