ESSENTIALS OF INVESTMENTS - CONNECT ACCE
11th Edition
ISBN: 9781266077951
Author: Bodie
Publisher: INTER MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 10PS
Summary Introduction
To determine:
The reason behind the requirement of keeping cash or cash equivalent securities in case of open end funds, but not in the case of closed end funds.
Introduction:
Open end funds are offered by the fund company directly to investors. The quantity of shares is fixed in case of open end funds. Closed end funds on the other hand, are generally sold in the secondary market and they are not redeemed by the fund manager. Due to such an arrangement the trading of shares might take place at a discount or substantial premium with respect to its NAV.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The approach uses a weighted average cost of capital that is unique to a particular project while determining the appropriate discount rate.
An all-equity firm faces a risk-free rate of 4%, a beta of 2, and a market risk premium of 6%. What is its cost of capital?
Multiple choice question.
18%
12%
14%
16%
created or destroyed.
uses the weighted average cost of capital to determine if value is being
Chapter 4 Solutions
ESSENTIALS OF INVESTMENTS - CONNECT ACCE
Ch. 4 - Prob. 1PSCh. 4 - Prob. 2PSCh. 4 - Prob. 3PSCh. 4 - Prob. 4PSCh. 4 - Prob. 5PSCh. 4 - Prob. 6PSCh. 4 - Prob. 7PSCh. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Prob. 10PS
Ch. 4 - An open-end fund has a net asset value of $10.70...Ch. 4 - Prob. 12PSCh. 4 - The composition of the Fingroup Fund portfolio is...Ch. 4 - Reconsider the Fingroup Fund in the previous...Ch. 4 - Prob. 15PSCh. 4 - Prob. 16PSCh. 4 - Prob. 17PSCh. 4 - Loaded-Up Fund charges a 12b-1 fee of 1% and...Ch. 4 - City Street Fund has a portfolio of $450 million...Ch. 4 - Prob. 20PSCh. 4 - Prob. 21PSCh. 4 - Prob. 22PSCh. 4 - Prob. 23PSCh. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Prob. 27PSCh. 4 - You expect a tax-free municipal bond portfolio to...Ch. 4 - Prob. 29PSCh. 4 - Prob. 30CCh. 4 - Prob. 1WMCh. 4 - Prob. 2WMCh. 4 - Prob. 3WM
Knowledge Booster
Similar questions
- Under the subjective approach for project evaluation, all proposed projects are placed into several Blank______ categories. Multiple choice question. risk cost revenue returnarrow_forwardUsing the WACC as the discount rate for future cash flows is appropriate only when the proposed investment is Blank______ the firm's existing activities. Multiple choice question. riskier than different from less risky than similar toarrow_forwardSuppose a project has a cost of $20 million and expected cash flows of 10 million per year for two years. If the WACC is 10%, what is the NPV of this project? Multiple choice question. $17.4 million –$2.6 million $2.6 million 0 millionarrow_forward
- Alpha Corporation consists of two divisions, X and Y. Division X is riskier than Division Y. If Alpha Corporation uses the firm's overall weighted average cost of capital to evaluate both divisions' projects, which division(s) will tend to be awarded greater funds for investment? Multiple choice question. Only division X Neither division Both divisions Only division Yarrow_forwardAlpha Corporation consists of two divisions, X and Y. Division X is riskier than Division Y. If Alpha Corporation uses the firm's overall weighted average cost of capital to evaluate both divisions' projects, which division(s) will tend to be awarded greater funds for investment? Multiple choice question. Only division X Neither division Both divisions Only division Yarrow_forwardWhich of the following is true of the dividends paid to common stockholders? Multiple choice question. All companies are legally required to pay dividends when they earn a net income. All companies are legally required to pay fixed dividends regardless of their financial performance. Dividends paid are not tax deductible. Unlike interest payments, dividends paid are tax-deductible at the corporate level and are tax-free at the personal level.arrow_forward
- If a firm issues no debt, its weighted average cost of capital will equal Blank______. Multiple choice question. its cost of debt half the sum of the cost of debt and equity its dividend yield its cost of equityarrow_forwardIf a firm issues no debt, its weighted average cost of capital will equal Blank______. Multiple choice question. its cost of debt half the sum of the cost of debt and equity its dividend yield its cost of equityarrow_forwardWhile computing the weighted average cost of capital, the is the better alternative when the market value is not readily available.arrow_forward
- The discount rate for firm's projects equals the cost of capital for the firm as a whole when Blank______. Multiple choice question. all projects have the same risk as the firm the average risk of the firm's projects is constant all projects have normally distributed returnsarrow_forwardTrue or false: The basic assumption of using weighted average cost of capital (WACC) to discount a project is that the capital has been raised in optimal proportions. True false question. True Falsearrow_forwardThe economic value added (EVA) is a performance measure based on the Blank______. Multiple choice question. risk-free rate weighted average cost of capital cost of equity expected returnarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education