A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?

Question

Quizplus · Accepted Answer

To find the premium or discount, first calculate the Net Asset Value (NAV) per share:  NAV = (Total Assets - Liabilities) / Shares Outstanding  NAV = ($379,000,000 - $640,000) / 36,000,000 = $10.51 per share  The shares are selling for $9.85, which is below the NAV.  Discount = (NAV - Market Price) / NAV = ($10.51 - $9.85) / $10.51 = 6.28% discount.

A Closed-End Fund Has Total Assets of $379 Million and Liabilities