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How does a fund work out its net asset value per share?
ATotal assets divided by the fund's total liabilities
BAssets minus liabilities, divided by shares outstanding
CMarket price minus the broker's sales commission charged
DTotal assets divided by the number of holdings owned
Answer & Solution
Correct answer: B. Assets minus liabilities, divided by shares outstanding
1. Net asset value is a per-share figure, so the calculation ends in a division by shares outstanding.
2. First subtract the fund's liabilities from its assets to get the net value of the pool.
3. Then divide that result by the number of shares outstanding to get NAV per share.
4. Dividing by liabilities or by the count of holdings produces a number with no meaning for a shareholder.
_Source: US SEC Office of Investor Education and Advocacy, "Mutual Funds and ETFs: A Guide for Investors", section Glossary of Key Mutual Fund and ETF Terms_
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