Net Asset Value (NAV)

Q: Jennifer submits an order to purchase shares of the ABC Growth Fund at 2:30 PM ET on Monday. The fund calculates its NAV at market close and has a 5% front-end sales load. The NAV at Monday's close is $20.00, and Tuesday's NAV is $20.50. What price per share will Jennifer pay for her purchase?

**B is correct.** Under forward pricing rules, Jennifer receives the NAV calculated at the next market close after her order was received. Since she ordered at 2:30 PM Monday (before the 4:00 PM ET close), she receives Monday's NAV of $20.00. With a 5% front-end load, her POP = NAV / (1 - sales charge %) = $20.00 / (1 - 0.05) = $20.00 / 0.95 = $21.05 per share. A ($20.00) is just the NAV without the sales load applied. C ($20.50) is Tuesday's NAV, but Jennifer gets Monday's NAV under forward pricing since her order was received before Monday's 4:00 PM close. D ($21.58) incorrectly applies Tuesday's NAV ($20.50) with the load calculation.

Q: At what time each business day must mutual funds calculate their net asset value (NAV)?

**C is correct.** Mutual funds must calculate NAV once daily at 4:00 PM Eastern Time, which is when U.S. stock markets close. This ensures all securities in the portfolio are valued at current market prices. A (9:30 AM) is when markets open, not when NAV is calculated. B (12:00 PM) is midday and would not capture end-of-day market prices. D (6:00 PM) is after market close; while funds may publish NAV results around this time, the official calculation uses 4:00 PM ET market prices.

Q: A mutual fund has total assets of $840 million, total liabilities of $15 million, and 50 million shares outstanding. What is the fund's NAV per share?

**A is correct.** Calculate: NAV = (Total Assets - Total Liabilities) / Shares Outstanding = ($840M - $15M) / 50M shares = $825M / 50M = $16.50 per share. B ($16.80) incorrectly uses only assets without subtracting liabilities: $840M / 50M = $16.80. C ($17.10) appears to use incorrect values in the numerator. D ($16.65) results from a calculation error. The key is to subtract liabilities before dividing by shares.

Q: All of the following statements about Net Asset Value (NAV) are accurate **EXCEPT**

**B is correct (the EXCEPT answer).** Mutual fund investors do NOT always transact at NAV alone. Investors buying load funds pay the public offering price (POP), which equals NAV plus the sales load. Only no-load funds allow purchase at NAV. However, redemptions do occur at NAV (or NAV minus any redemption fees). A is accurate: NAV is indeed calculated as (Assets - Liabilities) / Shares Outstanding. C is accurate: closed-end funds trade on exchanges at market prices, which can be at a premium (above NAV) or discount (below NAV). D is accurate: mutual funds calculate NAV once per business day at 4:00 PM ET.

Q: A closed-end fund has a NAV of $18.50 per share and is currently trading at $17.75 per share on the NYSE. Which of the following statements are accurate? 1. The fund is trading at a 4% discount to NAV 2. An investor purchasing shares would pay $18.50 per share 3. The fund's market price is determined by supply and demand 4. This pricing pattern would be impossible for an open-end mutual fund

**C is correct.** Statements 1, 3, and 4 are accurate. Statement 1 is TRUE: The discount is calculated as (NAV - Market Price) / NAV = ($18.50 - $17.75) / $18.50 = $0.75 / $18.50 = 4.05%, approximately 4%. Statement 2 is FALSE: Investors purchasing closed-end fund shares pay the market price ($17.75), not the NAV ($18.50). Closed-end funds trade on exchanges like stocks. Statement 3 is TRUE: Closed-end fund prices are determined by market supply and demand, which is why they can trade at premiums or discounts to NAV. Statement 4 is TRUE: Open-end mutual funds always transact at NAV (or NAV plus load), never at a discount or premium. They continuously issue and redeem shares at NAV, preventing market-driven price discrepancies.

Investment Vehicles High Relevance

The per-share value of a fund calculated by dividing total assets minus liabilities by shares outstanding. Mutual funds calculate NAV once daily at 4:00 PM ET (market close) and transact at forward pricing. Public offering price (POP) equals NAV plus sales load for load funds.

Example

A mutual fund with $500M in assets, $10M in liabilities, and 25M shares outstanding has a NAV of $19.60. With a 5% front-end load, the POP would be $20.63.

Common Confusion

NAV is not the same as market price for closed-end funds or ETFs. Mutual funds always transact at NAV (or NAV plus load), while closed-end funds trade at premiums or discounts to NAV on exchanges.

How This Is Tested

Calculating NAV using the formula: (Assets - Liabilities) / Shares Outstanding
Determining POP (public offering price) by adding sales load to NAV
Understanding that mutual funds buy/sell at forward pricing (next calculated NAV)
Recognizing that closed-end funds trade at premium or discount to NAV
Identifying that NAV is calculated once daily at market close (4:00 PM ET)

Calculation Example

Scenario: A mutual fund has total assets of $500 million, liabilities of $10 million, and 25 million shares outstanding.

Formula: NAV = (Total Assets - Total Liabilities) / Shares Outstanding

Steps:

Identify total assets: $500 million
Identify total liabilities: $10 million
Identify shares outstanding: 25 million
Calculate net assets: $500M - $10M = $490 million
Divide by shares: $490M / 25M shares = $19.60 per share

Result: The NAV is $19.60 per share. Investors buying or redeeming today will transact at this price (plus any applicable sales load).

Regulatory Limits

Description	Limit	Notes
NAV calculation frequency for mutual funds	Once daily at 4:00 PM ET	Must be calculated at market close each business day
Forward pricing rule	Next calculated NAV after order receipt	Investors receive the NAV calculated after their order is received

Example Exam Questions

Test your understanding with these practice questions. Select an answer to see the explanation.

Question 1

Jennifer submits an order to purchase shares of the ABC Growth Fund at 2:30 PM ET on Monday. The fund calculates its NAV at market close and has a 5% front-end sales load. The NAV at Monday's close is $20.00, and Tuesday's NAV is $20.50. What price per share will Jennifer pay for her purchase?

Question 2

At what time each business day must mutual funds calculate their net asset value (NAV)?

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Question 3

A mutual fund has total assets of $840 million, total liabilities of $15 million, and 50 million shares outstanding. What is the fund's NAV per share?

Question 4

All of the following statements about Net Asset Value (NAV) are accurate EXCEPT

Question 5

A closed-end fund has a NAV of $18.50 per share and is currently trading at $17.75 per share on the NYSE. Which of the following statements are accurate?

1. The fund is trading at a 4% discount to NAV
2. An investor purchasing shares would pay $18.50 per share
3. The fund's market price is determined by supply and demand
4. This pricing pattern would be impossible for an open-end mutual fund

💡 Memory Aid

"NAV at 4" = The daily report card for fund value. At 4:00 PM ET, mutual funds calculate (Assets - Liabilities) / Shares and MUST transact at that exact score. Closed-end funds? They ignore the report card and trade wherever the market decides—premium or discount to NAV.

Related Concepts

This term is part of this cluster:

🏢 Fund Structures

Where This Appears on the Exam

This term is tested in the following Series 65 exam topics:

Characteristics of Pooled Investments

Series 65 questions on NAV calculation, expense ratios, share classes, and fund fees....

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Net Asset Value (NAV)