Asked by Syanindita Kirana Larashira on Jul 09, 2024
Verified
The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?
A) 9.26% premium
B) 8.47% premium
C) 9.26% discount
D) 8.47% discount
Closed-end Investment
An investment fund that has a fixed number of shares outstanding, typically traded on a stock exchange, unlike open-end funds that can issue unlimited shares.
NAV
Net Asset Value, the per-share value of a mutual fund or exchange-traded fund, calculated by dividing the total value of all the securities in the portfolio by the number of shares outstanding.
Premium/Discount
Refers to the amount by which the market price of a bond exceeds (premium) or is less than (discount) its face value.
- Work out the costs, returns, and interests of mutual funds and appreciate their importance for investors.
- Analyze fund performance ratings and understand their implications for investors.
Verified Answer
CM
Christina MartinezJul 12, 2024
Final Answer :
D
Explanation :
NAV = ($300,000,000 - $5,000,000)/9,000,000 = $32.78
Discount = $32.78 - $30 = $2.78
Discount as % of NAV = $2.78/$32.78 = .0847 = 8.47%
Discount = $32.78 - $30 = $2.78
Discount as % of NAV = $2.78/$32.78 = .0847 = 8.47%
Learning Objectives
- Work out the costs, returns, and interests of mutual funds and appreciate their importance for investors.
- Analyze fund performance ratings and understand their implications for investors.