Suppose today a mutual fund contains 2,000 shares of J.P. Morgan Chase, currently trading at $64.75, 1,000 shares of Wal-mart, currently trading at $63.10, and 2,500 shares of Pfizer, currently trading at $31.50. The mutual fund has no liabilities and 10,000 shares outstanding held by investors.

a. What is the NAV of the fund?

b. Calculate the change in the NAV of the fund if tomorrow J.P. Morgan’s shares increase to $66, Wal-mart’s shares increase to $68, and Pfizer’s shares increase to $30.

c. Suppose that today 1,000 additional investors buy one share each of the mutual fund at the NAV of $27.135. This means that the fund manager has $27,135 additional funds to invest. The fund manager decides to use these additional funds to buy additional shares in Wal-mart. Calculate tomorrow’s NAV given the same rise in share values as assumed in part b.