The net asset value of a closed-end mutual fund is $11.20, and the share price is...

Question

Question

The net asset value of a closed-end mutual fund is $11.20, and the share price is $10.00. The discount or premium is closest to:

business finance

Answer 1

Answer #1

Net Asset Value (NAV) per share = $11.20 per share

Share Price (SP) = $10.00 per share

The share price ($10.00 per share) is less than the Net Asset Value ($11.20 per share), therefore, it would be a discount

The Discount Percentage = [(Share Price – Net Asset Value) / Net Asset Value] x 100

= [(SP – NAV) / NAV] x 100

= [($10.00 - $11.20) / $11.20] x 100

= [-$1.20 / $11.20] x 100

= -10.71% (It will be a discount, since the rate of return is negative 10.71%)

“Hence, the Discount is closest to 10.71 Percent”

Answer 2

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