A mutual fund has $840 million in assets and $40,000 in liabilities. There are 35 million shares outstanding. The fund charges a 5% front-end load. What is the offering price of the fund?

Question

Quizplus · Accepted Answer

The net asset value (NAV) of the fund is calculated by subtracting the liabilities from the assets and then dividing by the number of shares outstanding. So, NAV = ($840,000,000 - $40,000) / 35,000,000 = $23.99. The offering price is then calculated by dividing the NAV by (1 - the front-end load percentage), so Offering Price = $23.99 / (1 - 0.05) = $25.26.

A Mutual Fund Has $840 Million in Assets and $40,000