A mutual fund has the following assets in its portfolio: $40 million in fixed-income securities and $40

Question:

A mutual fund has the following assets in its portfolio: $40 million in fixed-income securities and $40 million in at current market values. In the event of a liquidity crisis, the fund can sell the assets at a 96 percent of market value if they are disposed of in two days. The fund will receive 98 percent if the assets are disposed of in four days. Two shareholders, A and B, own 5 percent and 7 percent of equity (shares), respectively.
a. Market uncertainty has caused shareholders to sell their shares back to the fund. What will the two shareholders receive if the mutual fund must sell all of the assets in two days? In four days?
b. How does this situation differ from a bank run? How have bank regulators mitigated the problem of bank runs? Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...