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Difficulty: EasyInvestment Companies and Managed Funds

A balanced mutual fund holds total portfolio assets of $95,000,000\$95,000,000 and has total liabilities of $15,000,000\$15,000,000. If the fund has 5,000,0005,000,000 shares outstanding, what is the fund's Net Asset Value (NAV) per share in dollars?

Answer: 16 $

Answer

The Net Asset Value (NAV) per share is $16.00\$16.00.
The Net Asset Value (NAV) per share is determined by the formula: NAV=Total Assets−Total LiabilitiesShares Outstanding\text{NAV} = \frac{\text{Total Assets} - \text{Total Liabilities}}{\text{Shares Outstanding}}. Subtracting $15,000,000\$15,000,000 in liabilities from $95,000,000\$95,000,000 in total assets yields net assets of $80,000,000\$80,000,000. Dividing $80,000,000\$80,000,000 by 5,000,0005,000,000 shares outstanding results in an NAV of $16.00\$16.00 per share.

Step-by-Step Solution

1
Subtract total liabilities from total assets to determine net assets.
Net Assets = $95,000,000−$15,000,000=$80,000,000\$95,000,000 - \$15,000,000 = \$80,000,000
Net asset value requires deducting total obligations from gross portfolio assets.
2
Divide total net assets by total shares outstanding.
NAV per share = $80,000,000/5,000,000=$16.00\$80,000,000 / 5,000,000 = \$16.00
Dividing total net equity by outstanding shares yields the per-share value of the fund.

Key Concept

Net Asset Value (NAV) Per Share Calculation
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Topics

Investment Companies and Managed Funds

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