Reading 74: Alternative Investments-LOS a 习题精选 buying, 2011, investment, companies, investor

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS a: Differentiate between an open-end and a closed-end fund, and explain how net asset value of a fund is calculated and the nature of fees charged by investment companies.

 

 

An investor is contemplating buying a load fund versus a no load mutual fund. She is trying to figure out the actual amount she will have to spend on the load fund. The shares have a net asset value (NAV) of $34.50 and a load of 5.2%. Determine which type of fund will always have a share price equal to the NAV and the price she will pay for the load fund.

Fund

Offering Price

A) open-end $34.50

B) close-end $36.39

C) open-end $36.39

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The share price of an open-end fund will always equal the NAV, since the investment company is obligated to redeem shares at any time at current market value.

Offering price = $34.50 / (1 – 0.052) = $36.39.

[此贴子已经被作者于2011-4-2 11:25:35编辑过]

luqian55

thanks a lot

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A closed-end fund:

A) has its price determined by the net asset value (NAV).

B) has its price determined by supply and demand, regardless of its net asset value (NAV).

C) is traded in the primary market but not the secondary market.

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Closed-end investment companies are initiated through a stock offering to raise funds. The investment company does not issue or redeem shares after the initial offering. Shares of a closed-end investment company are traded in public markets and are priced by supply and demand. The share price of a closed-end fund is not directly linked to the fund’s NAV. The NAV is the prevailing market value of all the shares and assets owned by the fund. Many closed-end funds sell at a discount of 5 to 20% from their NAV.

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For the equity shares of an open-end investment company, the share value:

A) is determined in the secondary market.

B) always equals NAV.

C) may or may not equal NAV.

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Shares of a closed-end investment company are determined in the secondary market and may or may not equal NAV. Share value of an open-end investment company always equals NAV because the investment company stands ready to redeem shares at their net asset value.

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The per-share value of an investment company’s assets minus its liabilities is called the:

A) net asset value.

B) discount.

C) current market value.

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The net asset value (NAV) of an investment company is calculated as assets minus liabilities, stated on a per-share basis.

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Which statement about mutual funds is most accurate?

A) The redemption fee for a closed-end fund is the commission charged on the sale and a portion of the bid/ask spread of the shares.

B) The liquidity of an open-end fund is provided by the open market.

C) Some open-end funds charge no fees.

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Since closed-end funds are traded in the secondary market for a price determined by supply and demand for shares, the spread along with the sales commission represent the redemption fee. All funds charge fees, although the fees vary widely from fund to fund. In addition, some funds charge a load in addition to fees. The liquidity of an open-end fund is provided by the company that manages it, not the open market.

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Open-end investment companies:

A) must register a maximum number of shares with the Securities and Exchange Commission (SEC).

B) must redeem shares at the net asset value with no fees included.

C) can continue to sell and repurchase shares after their initial public offerings.

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The primary difference between open-end and closed-end funds is that open-end funds continue to sell and repurchase shares after their initial public offerings. Open-end investment companies can be load or no-load.

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Which of the following statements about investment companies is least accurate?

A) The investment company's board of directors hires an investment management company to select securities, manage the portfolio, and handle administrative duties.

B) Generally the investment advisory firm initiating the fund will also act as the fund's investment management company.

C) Investment companies are generally wholly owned subsidiaries of the investment advisory firm that creates them.

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Investment companies are owned by individual investors. For example, individuals who purchase shares in a mutual fund are the "owners" of that fund.

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You are going to invest in a closed-end mutual fund and are told that the net asset value of the fund is $20.40, and the share price is $18.20. What is the discount you would receive or the premium that you would pay?

A) -0.1209.

B) -0.1078.

C) 0.1209.

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18.20 ? 20.40	= -0.1078
20.40

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The net asset value (NAV) of an open-end fund is determined by the:

A) book value of all assets divided by the number of shares outstanding.

B) market value of assets minus liabilities divided by the number of shares outstanding.

C) supply and demand for the shares in the investment management company.

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This is the equation for the calculation of NAV.