FIN 332 Lecture Notes - Lecture 4: Investment Company, Mutual Fund, Money Market
Document Summary
Investment companies- collect funds from investors and then invest those funds in a wide range of securities: record keeping and administration- issue reports, capital gains dist. Etc: diversification and divisibility- enable investors to get fractional shares, professional management, lower transaction costs- achieve substantial savings on brokerage fees & commissions. Value of each share in investment company = net asset value. Nav = market value liabilities / # of shares os. Ex. portfolio worth mil, fund owes mil to investment advisers and another mil in expenses with 5 million shares. Nav = (120 5) / 5 = per share. Nav = (2905. 1 36. 1) / 79. 6 = . 04. Investment company act of 1940: unit investment trusts or managed investment companies. Unit investment trusts- pools of $ invested in portfolio that is fixed for life of fund. Sells shares of portfolios in form of redeemable trust certifcates.
