cover? Many closed-end mutual funds charge a
why not?
hy or
open-end fund? Why?
8. Open-End versus Closed-End Funds (LO2, CFA3) If you were concerned about the liquid-
ity of mutual fund shares that you held, would you rather hold shares in a closed-end fund or an
9. Mutual Fund Performance (LO3) Refer to Figure 4.5. Look at the three-year performance
for the funds listed. Why do you suppose there are so few poor performers? Hint: Think about
the hit TV show Survivor.
10. Hedge Fund Fees (LO4, CFA4) How does a high-water mark constrain hedge fund managers
from earning excess performance management fees?
Questions and Problems
1. Net Asset Value (LO2, CFA3) The World Income Appreciation Fund has current assets with
a market value of $8.5 billion and has 410 million shares outstanding. What is the net asset
value (NAV) for this mutual fund?
2. Front-End Loads (LO2) Suppose the mutual fund in Problem 1 has a current market price
quotation of $21.89. Is this a load fund? If so, calculate the front-end load.
3. Calculating NAV (LO2, CFA3) The Emerging Growth and Equity Fund is a “low-load”
fund. The current offer price quotation for this mutual fund is $15.95, and the front-end load is
2.0 percent. What is the NAV? If there are 19.2 million shares outstanding, what is the current
market value of assets owned by the fund?
4. Money Market Funds (LO2, CFA2) The Aqua Liquid Assets Money Market Mutual Fund has
a NAV of $1 per share. During the year, the assets held by this fund appreciated by 1.7 percent. If
you had invested $25,000 in this fund at the start of the year, how many shares would you own at
the end of the year? What will the NAV of this fund be at the end of the year? Why?
5. NAV (LO2, CFA3) An open-end mutual fund has the following stocks:
Stock
Shares
Stock Price
А
6,000
$98
B
33,000
19
C
4,600
89
D
82,500
12
If there are 50,000 shares of the mutual fund, what is the NAV?
6. NAV (LO2, CFA3) Suppose the fund in Problem 5 has liabilities of $110,000. What the
NAV of the fund now?
7. Front-End Load (LO2) In Problem 6, assume the fund is sold with a 6.25 percent frenad
load. What is the offering price of the fund?
market inefficiencies?
03, CFA3) What is noise trader risk? How can noise trader risk lead to
Questions and Problems
Jestions
1. Advance/Decline Lines (L04, CFA1) Use the data below to construct the advance/decline
line for the stock market. Volume figures are in thousands of shares.
Stocks
Advancing
Advancing
Volume
Stocks
Declining
Declining
Volume
Monday
1,634
825,503
1,402
684,997
1,876
Tuesday
Wednesday
928,360
1,171
440,665
1,640
623,369
1,410
719,592
Thursday
2,495
1,101,332
537
173,003
Friday
1,532
508,790
1,459
498,585
2. Calculating Arms Ratio (LO4, CFA1) Using the data in Problem 1, construct the Arms ratio
on each of the five trading days.
3. Simple Moving Averages (L04, CFA1) The table below shows the closing monthly stock
prices for IBM and Amazon. Calculate the simple three-month moving average for each month
for both companies.
IBM
AMZN
$169.64
$600.36
173.29
613.40
180.13
586.76
195.81
544.10
196.69
529.02
204.49
506.38
222.52
603.69
215.23
540.96
216.23
515.04.
213.51
592.64
192.29
599.39
173.10
645.90
4. Exponential Moving Averages (LO4, CFA1) Using the stock prices in Problem 3, calculate
the exponential three-month moving average for both stocks where two-thirds of the average
weight is placed on the most recent price.
5. Exponential Moving Averages (L04, CFA1) Using the stock prices in Problem 3, calculate
the exponential three-month moving average for IBM and Amazon. Place 50 percent of the
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