A closedend fund has total assets of 478 million and liabili

A closed-end fund has total assets of $478 million and liabilities of $640,000. There are 34 million shares outstanding. What is the percentage of premium or discount if the shares are currently selling for $9.77 each?

Solution

first let us find out the NAV:

NAV = (total assets - total liabilities) / number of shares outstanding.

=> ($478 million - $0.64 million) / 34 million shares.

=> $477.36 / 34 million shares.

=>$14.04 per share.

sale price of share = $9.77.

=> percentage of discount = (nav - selling price) / NAV.*100.

=> ($14.04 - $9.77) / $14.04 *100

=>30.41%.