BUS20463 (Investment; Semester A 2023_24)
Week 5 Exercises (L4 Investment Companies; Group C)
1. A closed-end fund has an investment portfolio currently worth USD200 million in assets with
total liabilities of USD3 million. If there are 5 million shares outstanding in the market,
a. Calculate the NAV of the fund.
b. If the fund is currently selling for USD36 per share, what is the premium or discount as a
percentage of its NAV ?
c. If it is selling at a premium, does it mean you should not buy it ? Alternatively, if it is selling at a
discount, does it mean you should buy it ? Explain and justify your answer.
2. What are the pros and cons of investing in REITs ?
3. Use a real-life stock example (HK stocks only) and based on the month-end closing price of the
stock from January to August 2023, find out if there is any benefit from the Dollar-Cost-Averaging
(DCA) strategy. From your findings, comment on the effectiveness of DCA investment strategy.
4. You want to buy your first mutual fund next month and you can afford higher level of risk. You
prefer to buy an equity fund with medium to high risk. What are your selection criteria for the
equity fund which is the most suitable to you ? You may use a real example to illustrate your
answer.
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