18· The following is information taken off of the internet about some popular mu
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18· The following is information taken off of the internet about some popular mutual funds. YTD 3-yr Family! Fund Symbol NAV Chg returnchg BGNCX 10.20 -001 AHGCX 17.73 0.12 5.6 6.5 Ginnie Mae -1.9-0.8 HeritageC a) If you have $5000 to invest, how many shares of Ginnie Mae would you be able to buy? b) If you invested $5000 3 years ago in HeritageC, how much would you have today? c) Which would you rather invest in and why? d) Explain in your own words the difference between a mutual fund and a stockExplanation / Answer
a] Amount to invest = $5000
Price per unit of Ginnie Mac = Net Asset value (NAV) = 10.20
No of shares can be bought = Amount to invest / Price per unit = 5000/10.20 = 490.196 units
c] One must invest in Heritage C since it has positive YTD return on investment.
To make it more clear,
Ginnie Mac
no of units = Amount invested / Price per share = 490 units
NAV per unit = 10.20
YTD return = - 1.9
new NAV = 10.20 - {10.20 * (-1.9%)} = 10
The value of the fund will be 490 units multiplied by new NAV 10 = $4900
Heritage C
no of units = Amount invested / Price per share = 5000/ 17.73 = 282 units
NAV per unit = 17.73
YTD return = 5.6%
new NAV = 17.73 + {17.73 * (5.6%)} = 17.73 + 0.99 = 18.72
The value of the fund will be 282 units multiplied by new NAV 18.72 = $5279
d]
Mutual Funds Stock 1) It is a portfolio investment consists of various company shares, debt instruments or mix of both. It is an investment made in a single company's shares 2) Risk involved with the securities is less as the investment is distributed across stocks of different sectors. Risk involved is high as it depends on the performance of a single company. 3) Return on investment depends on the selection of shares invested and is stable. Return depends on the market sentiment mostly.Related Questions
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