A mutual fund has 300 shares of General Electric, currently trading at $ 22, and 400 shares of Microsoft, Inc., currently trading at $ 28. The fund has 1,000 shares outstanding.
a. What is the NAV of the fund?
b. If investors expect the price of General Electric to increase to $ 26 and the price of Microsoft to decline to $ 20 by the end of the year, what is the expected NAV at the end of the year?
c. Assume that the price of General Electric shares is realized at $ 26. What is the maximum price to which Micro-soft can decline and still maintain the NAV as estimated in (a)?