7. The Focus Fund is a mutual fund that holds long-term positions in a small number of non-dividend-paying stocks. Its holdings at the end of two recent years are as follows: YEAR 1 YEAR 2 Stock Shares Price Shares Price 100,000 $45.25 100,000 $48.75 225,000 25.38 225,000 24.75 375,000 14.50 375,000 12.38 115,000 87.13 115,000 98.50 154,000 56.50 154,000 62.50 175,000 63.00 175,000 77.00 212,000 32.00 212,000 38.63 15.25 275,000 8.75 Н 275,000 9.63 450,000 27.45 450,000 71.25 90,000 75.38 J 90,000 42.13 87,000 49.63 87,000 27.88 137,000 19.88 17.75 150,000 19.75 0. $2,873,000 Cash $3,542,000 $ 830.000. $ 730 .000 <> 137,000 19.88 0. 27.88 0. 17.75 150,000 19.75 Cash $3,542,000 $2,873,000 Expenses $ 730,000 $ 830,000 At the end of both years, Focus Fund had 5,430,000 shares outstanding. a. Calculate the net asset value for a share of the Focus Fund at the end of Year 1, being sure to include the cash position in the net total portfolio value. b. Immediately after calculating its Year 1 NAV, Focus Fund sold its position in Stock L and purchased its position in Stock M (both transactions were done at Year 1 prices). Calculate the Year 2 NAV for Focus Fund, and compute the growth rate in the fund share value on a percentage basis. c. At the end of Year 2, how many fund shares of the Focus Fund could the manager redeem without having to liquidate her stock positions (that is, using only the cash account)? d. If immediately after calculating the Year 2 NAV the manager received investor redemp- tion requests for 500,000 shares, how many shares of each stock would she have to sell in order to maintain the same proportional ownership position in each stock? Assume that she liquidates the entire cash position before she sells any stock holdings. 8. Mutual funds can effectively charge sales fees in one of three ways: front-end load fees,
7. The Focus Fund is a mutual fund that holds long-term positions in a small number of non-dividend-paying stocks. Its holdings at the end of two recent years are as follows: YEAR 1 YEAR 2 Stock Shares Price Shares Price 100,000 $45.25 100,000 $48.75 225,000 25.38 225,000 24.75 375,000 14.50 375,000 12.38 115,000 87.13 115,000 98.50 154,000 56.50 154,000 62.50 175,000 63.00 175,000 77.00 212,000 32.00 212,000 38.63 15.25 275,000 8.75 Н 275,000 9.63 450,000 27.45 450,000 71.25 90,000 75.38 J 90,000 42.13 87,000 49.63 87,000 27.88 137,000 19.88 17.75 150,000 19.75 0. $2,873,000 Cash $3,542,000 $ 830.000. $ 730 .000 <> 137,000 19.88 0. 27.88 0. 17.75 150,000 19.75 Cash $3,542,000 $2,873,000 Expenses $ 730,000 $ 830,000 At the end of both years, Focus Fund had 5,430,000 shares outstanding. a. Calculate the net asset value for a share of the Focus Fund at the end of Year 1, being sure to include the cash position in the net total portfolio value. b. Immediately after calculating its Year 1 NAV, Focus Fund sold its position in Stock L and purchased its position in Stock M (both transactions were done at Year 1 prices). Calculate the Year 2 NAV for Focus Fund, and compute the growth rate in the fund share value on a percentage basis. c. At the end of Year 2, how many fund shares of the Focus Fund could the manager redeem without having to liquidate her stock positions (that is, using only the cash account)? d. If immediately after calculating the Year 2 NAV the manager received investor redemp- tion requests for 500,000 shares, how many shares of each stock would she have to sell in order to maintain the same proportional ownership position in each stock? Assume that she liquidates the entire cash position before she sells any stock holdings. 8. Mutual funds can effectively charge sales fees in one of three ways: front-end load fees,
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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hi, could you please help me with (d)?
Transcribed Image Text:7. The Focus Fund is a mutual fund that holds long-term positions in a small number of
non-dividend-paying stocks. Its holdings at the end of two recent years are as follows:
YEAR 1
YEAR 2
Stock
Shares
Price
Shares
Price
100,000
$45.25
100,000
$48.75
225,000
25.38
225,000
24.75
375,000
14.50
375,000
12.38
115,000
87.13
115,000
98.50
154,000
56.50
154,000
62.50
175,000
63.00
175,000
77.00
212,000
32.00
212,000
38.63
15.25
275,000
8.75
Н
275,000
9.63
450,000
27.45
450,000
71.25
90,000
75.38
J
90,000
42.13
87,000
49.63
87,000
27.88
137,000
19.88
17.75
150,000
19.75
0.
$2,873,000
Cash
$3,542,000
$ 830.000.
$ 730 .000
<>
Transcribed Image Text:137,000
19.88
0.
27.88
0.
17.75
150,000
19.75
Cash
$3,542,000
$2,873,000
Expenses
$ 730,000
$ 830,000
At the end of both years, Focus Fund had 5,430,000 shares outstanding.
a. Calculate the net asset value for a share of the Focus Fund at the end of Year 1, being
sure to include the cash position in the net total portfolio value.
b. Immediately after calculating its Year 1 NAV, Focus Fund sold its position in Stock L
and purchased its position in Stock M (both transactions were done at Year 1 prices).
Calculate the Year 2 NAV for Focus Fund, and compute the growth rate in the fund
share value on a percentage basis.
c. At the end of Year 2, how many fund shares of the Focus Fund could the manager redeem
without having to liquidate her stock positions (that is, using only the cash account)?
d. If immediately after calculating the Year 2 NAV the manager received investor redemp-
tion requests for 500,000 shares, how many shares of each stock would she have to sell
in order to maintain the same proportional ownership position in each stock? Assume
that she liquidates the entire cash position before she sells any stock holdings.
8. Mutual funds can effectively charge sales fees in one of three ways: front-end load fees,
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