Chapter 1: Q11I. (page 105)
An open-end fund has a net asset value of $10.70 per share. It is sold with a front-end load of 6%. What is the offering price?
$ 11.38
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What are some comparative advantages of investing your assets in the following:
a. Unit investment trusts.
b. Open-end mutual funds.
c. Individual stocks and bonds that you choose for yourself.
Why do financial assets show up as a component of household wealth, but not of national wealth? Why do financial assets still matter for the material well-being of an economy?
Consider the three stocks in the following table. P t represents price at time t, and Q t represents shares outstanding at time t. Stock C splits two-for-one in the last period.
P0 | Q0 | P1 | Q1 | P2 | Q2 | |
A | 90 | 100 | 95 | 100 | 95 | 100 |
B | 50 | 200 | 45 | 200 | 45 | 200 |
C | 100 | 200 | 110 | 200 | 55 | 400 |
a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t 50 to t 51).
b. What must happen to the divisor for the price-weighted index in year 2?
c. Calculate the rate of return of the price-weighted index for the second period (t 51to t 52).
What is the role of an underwriter? A prospectus?
What are the benefits to small investors of investing via mutual funds? What are the costs?
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