A mutual fund has 450 shares of General Electric, currently trading at $17, and 450 shares of Microsoft, Inc., currently trading at $25. 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 $20 and the price of Microsoft to decline to $14 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 $20. What is the maximum price to which Microsoft can decline and still maintain the NAV as estimated in (a)?