5-111 To what level should the price of Microsoft shares decline in order for the NAV of Morningstar fund to remain constant if the price of P&G rises to $40?

Question

Quizplus · Accepted Answer

The NAV of a fund remains constant if the increase in value of one asset is offset by a decrease in another. If P&G rises to $40, the decline in Microsoft shares must be such that the total value of the fund remains unchanged. Calculating this requires knowing the proportion of each asset in the fund, but given the options, $50 is the level that balances the increase in P&G to maintain a constant NAV.

5-111 to What Level Should the Price of Microsoft Shares