Final answer:
The relationship between the net asset value per share (NAVPS) and the market price of shares in closed-end funds can vary depending on factors such as investor sentiment, market conditions, and fees associated with the fund.
Step-by-step explanation:
The relationship between the net asset value per share (NAVPS) and the market price of shares in closed-end funds can vary. In general, the NAVPS represents the underlying value of the fund's assets per share. It is calculated by dividing the total net assets of the fund by the number of shares outstanding. The market price, on the other hand, is determined by supply and demand factors in the market.
In an ideal situation, the market price per share would equal the NAVPS. However, due to factors such as investor sentiment, market conditions, and fees associated with the fund, the market price can deviate from the NAVPS. If the market price is higher than the NAVPS, it is said to be trading at a premium. Conversely, if the market price is lower than the NAVPS, it is said to be trading at a discount.
For example, let's say a closed-end fund has a NAVPS of $10 and the market price of its shares is $12. This indicates that the fund is trading at a premium of $2 per share. Similarly, if the market price is $8, the fund would be trading at a discount of $2 per share.