FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationRegulatory Fundamentals and General Product KnowledgeMedium
A mutual fund's Net Asset Value (NAV) is calculated at the end of each business day. If a fund has total assets of $500 million, total liabilities of $50 million, and 20 million shares outstanding, what is the NAV per share?
- A$27.50
- B$25.00
- C$2.25
- D$22.50
Show answer & explanationAnswer & explanation
Correct answer: D. $22.50
NAV per share is calculated by subtracting total liabilities from total assets and then dividing by the number of shares outstanding. ($500,000,000 - $50,000,000) / 20,000,000 = $450,000,000 / 20,000,000 = $22.50.
Why the other options are wrong
- A. This would be (Assets + Liabilities) / Shares Outstanding, which is incorrect.
- B. This would be assets divided by shares, ignoring liabilities.
- C. This is incorrect; likely a decimal error or miscalculation.
Net Asset Value (NAV)
The per-share value of a mutual fund, calculated by dividing the fund's total assets minus its total liabilities by the number of outstanding shares.
- Calculated daily at the close of the market.
- Used to determine the price at which mutual fund shares are bought and sold.
- Formula: (Total Assets - Total Liabilities) / Shares Outstanding.
Memory trick: Assets minus debts, then divide by shares to get your NAV.