Question 1 a. Net asset value = Market value of the portfolio (assets)- Liabilities/ Number of shares outstanding = 1,050,000 – 50,000/10,000 = $100 b. Net asset value = 2,100,000 – 0 /10,000 = $210 No of shares = 5000/210 = 23.81 shares. Question 2 I disagree. The NAV is not determined continuously throughout the day because it is valued at the closing stock prices of the day. Therefore it can only be determined at the close of the day. Question 3 Closed-end funds is a publicly traded investment by the Securities Exchange Commission. It is a pooled investment fund with a manager overseeing the portfolio; it raises a fixed amount of capital through an initial public Offering (IPO) Question 4 Closed-end funds use leverage to generate more money unlike issuing of shares like the mutual funds because, through leverage, they make use of borrowings which adds the risk element as compared to the open end funds but has a greater reward than the issuing of shares. Therefore the closed end funds generate more funds. Question 5 There is a divergence in the price of NAV because in some cases there are reasons of the premium or discounts. A share price may be below the NAV because the funds have a large built-in tax liability and investors are discounting the share prices for that tax liability. The fund's shares may trade at a premium to the NAV because the funds offer relatively cheap access to, and professional management of, stock in another country about which information is not readily available to small investors. Question 6 The difference between unit trust and closed end funds The assets held in the closed end funds are actively managed whereas the assets held in the assets trust funds are passively managed. In the closed end funds, the investor cannot directly redeem the shares whereas the unit trust funds can be directly redeemed. The unit trust funds have a limited duration whereas the closed end funds are operated continuously and are indefinite. Question 7 Front end load, It is the load (sales charge for the agent- distributed fund) deductible from the invested amount by the client and which is paid to the agent or distributor. Back end load, It is a sales charge or fee that investors pay when selling mutual fund shares, and the fee amount to a percentage of the value of the share being sold. They are imposed at the time funds shares are sold or redeemed. Level load, these are sales charges which are deducted every year on a consistent basis from an investor's mutual funds to pay for distribution and marketing costs for as long as the investor holds the funds. 12b-I fee, it is an annual operational expense imposed by mutual fund for purposes of marketing, distribution including continuing agent's compensation and manufacturers marketing and advertisement expenses Management fee, It is the costs which accrued to the mutual fund's manager for having an investors assets managed professionally. The fee is used to compens ...