Open-end Fund A has 100 shares of ATT valued at $100 each and 50 shares of Toro valued at $50 each. Closed-end Fund B has 75 shares of ATT and 100 shares of Toro. Both funds have 100 shares outstanding

a. What is the NAV of each fund using these prices?
b. Assume that another 100 shares of ATT valued at $100 are added to Fund A What is the effect on Fund A's NAV of both funds? Assume that Fund A has only 100 shares of ATT.

What is answer?

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To calculate the NAV (Net Asset Value) of each fund, we need to divide the total value of the holdings by the total number of shares outstanding.

a.
For Open-end Fund A:
- The total value of the shares of ATT is 100 shares * $100 each = $10,000.
- The total value of the shares of Toro is 50 shares * $50 each = $2,500.
- Therefore, the total value of all the holdings in Fund A is $10,000 + $2,500 = $12,500.
- Since there are 100 shares outstanding, the NAV of Fund A is $12,500 / 100 shares = $125 per share.

For Closed-end Fund B:
- The total value of the shares of ATT is 75 shares * $100 each = $7,500.
- The total value of the shares of Toro is 100 shares * $50 each = $5,000.
- Therefore, the total value of all the holdings in Fund B is $7,500 + $5,000 = $12,500.
- Since there are 100 shares outstanding, the NAV of Fund B is $12,500 / 100 shares = $125 per share.

b.
When another 100 shares of ATT valued at $100 each are added to Fund A, the total value of the ATT shares in Fund A increases.
- The new total value of the shares of ATT is 200 shares * $100 each = $20,000.
- The total value of the shares of Toro remains the same at 50 shares * $50 each = $2,500.
- Therefore, the new total value of all the holdings in Fund A is $20,000 + $2,500 = $22,500.
- Since the number of shares outstanding remains 100, the new NAV of Fund A is $22,500 / 100 shares = $225 per share.

In summary, adding more shares of ATT to Fund A increases the total value of the fund's holdings and subsequently increases its NAV.