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The current market value of a mutual fund's portfolio minus the mutual fund's liabilities equals a figure, that when divided by the number of shares outstanding, results in the:

a. outstanding balance.
b. book value.
c. accounting value.
d. net asset value.
e. libor rate.

1 Answer

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Final answer:

The correct answer is d. net asset value (NAV). It is calculated by subtracting a mutual fund's total liabilities from its portfolio's market value and dividing this by the number of shares outstanding, similar to how a bank's net worth is calculated on its T-account.

Step-by-step explanation:

The current market value of a mutual fund's portfolio minus the mutual fund's liabilities equals a figure, that when divided by the number of shares outstanding, results in the net asset value (NAV). To understand this concept, it's helpful to look at a similar financial document, the T-account, which separates a firm's assets from its liabilities. The assets of a bank, as an example, include reserves and financial instruments, while liabilities constitute what the bank owes, like deposits.


The net worth of a bank, akin to the NAV for a mutual fund, would be total assets minus total liabilities. For a mutual fund, calculating the NAV involves taking the total asset value, subtracting liabilities, and then dividing by outstanding shares. This value is pivotal as it represents the per-share value of the mutual fund.

User Mamdouh Saeed
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