Calculating Coupon Payments and Net Asset Value of a Bond and Mutual Fund
What is the Net Asset Value of this mutual fund today?
Given the previous question, how do we calculate the coupon payment for the bond and the Net Asset Value of the mutual fund?
Answer:
To calculate the coupon payment for the bond, we need to multiply the face value of the bond by the coupon rate. In this case, the face value is $1,000 and the coupon rate is 4%.
Coupon payment = Face value * Coupon rate
Coupon payment = $1,000 * 0.04
Coupon payment = $40
Therefore, each coupon payment for this bond is $40.
To calculate the Net Asset Value (NAV) of the mutual fund today, we need to add up the current value of all the assets owned by the fund. The fund owns 1 share of Target stock ($160), 1 share of Apple stock ($139), 1 share of Johnson and Johnson stock ($171), and 1 share of Honeywell stock ($208).
Net Asset Value = Value of Target stock + Value of Apple stock + Value of Johnson and Johnson stock + Value of Honeywell stock
Net Asset Value = 1 * $160 + 1 * $139 + 1 * $171 + 1 * $208
Net Asset Value = $160 + $139 + $171 + $208
Net Asset Value = $678
Therefore, the Net Asset Value of this mutual fund today is $678.
Detail Explanation:
In conclusion, each coupon payment for the bond is $40, and the Net Asset Value of the mutual fund today is $678.
Calculating coupon payments and net asset value is essential for investors to understand the returns and value of their investments. By knowing the coupon payment for a bond and the net asset value of a mutual fund, investors can make informed decisions regarding their portfolio.
Understanding how to calculate these financial metrics allows investors to assess the performance and profitability of their investments accurately. It also helps in comparing different investment opportunities and determining which ones offer the best returns.
Therefore, by calculating the coupon payment for a bond and the net asset value of a mutual fund, investors can better manage their investment portfolios and achieve their financial goals.