An Open-End Bond Mutual Fund Is Holding a Three-Year, $1

question 5

Multiple Choice

An open-end bond mutual fund is holding a three-year, $1 million face value 5 percent annual coupon bond selling at par.What is the impact on the total asset value of the fund of a 1 percent decrease in interest rates?

• A)A decrease of $10,000.
• B)An increase of $10,000.
• C)A decrease of $26,730.
• D)An increase of $27,751.
• E)The answer depends upon the number of mutual funds shares outstanding.

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Definitions:

Work In Process Inventory

Goods that are in various stages of production within a factory but are not yet completed.

Transferred Out

In cost accounting, it refers to the costs associated with products or goods that have been moved from one production process to another.

Weighted-Average Process

A costing method used in manufacturing, blending the costs of all units produced in a period, regardless of when they were started or finished.

Work In Process

Units of product that are only partially complete and will require further work before they are ready for sale to the customer.