Series 7 practice questioneasyPackaged Products — Mutual Funds
How is a mutual fund's net asset value (NAV) calculated?
- ATotal assets minus total liabilities, divided by the number of outstanding shares✓ Correct answer
- BTotal assets divided by total liabilities
- CMarket price of the fund's shares on the exchange
- DTotal revenue minus total expenses for the year
Explanation
Why A — Total assets minus total liabilities, divided by the number of outstanding shares
NAV is calculated by taking the fund's total assets (securities, cash, receivables), subtracting total liabilities (expenses payable, management fees owed), and dividing by the number of shares outstanding. This calculation is performed at the end of each business day.
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