Question

4. James Fund has assets of $192 million, liabilities of $4 million and 15 million outstanding shares. James Fund is an open-ended fund.

a. Calculate the net asset value of the fund.

b. Assume investors invest an additional 2.51 million in the fund.

i. Calculate the additional shares to be issues.

ii. Calculate the total shares outstanding.

iii. Calculate the net asset value.

C. Assume that over the past year James Fund has bought $215 million of assets and sold $211 million of assets and that the average daily asset amount is $192 million. What is the fund's turnover ratio?

Answer 1

Answer-4(a):

Net asset value = total of Assets - total of liabilities

                         = $192 - $4 = $188 million

Net asset value per share = Net assets value / Outstanding shares

                                         = $188 million/ 15 = $12.53 per share

Answer-4(b)(i):

Additional shares to be issued = $2.51 million / $12.53 = 0.20 million

Answer-4(b)(ii):

Total shares outstanding = 15 million + 0.20 million = 15.20 million

Answer-4(b)(iii):

Net assets value = $188 million + $2.51 million = $190.51 million

Net asset value per share = $190.51 million / 15.20 million = $12.53

Answer-4(c):

Fund turnover ratio = Lower of purchase or sale / Average monthly assets

                               = Lower of $215 or $211 / ($192 × 30)

                                = $211 / $5,760 = 3.66%