Net asset value increases when

Question

Quizplus · Accepted Answer

Net asset value (NAV) of a mutual fund is calculated by dividing the total assets of the fund by the number of outstanding shares. Therefore, the NAV increases when the value of the underlying securities held by the fund increases. Choice B is incorrect because gains realized on the underlying securities are paid out to shareholders as dividends, which do not affect the NAV of the fund. Choice C is incorrect because while attracting new money from investors may increase the total assets of the fund, it also increases the number of outstanding shares, which keeps the NAV unchanged.

Net Asset Value Increases When