Question

Calculate the net asset value of an ETF with portfolio holdings equal to $100 per share in market value and an expense ratio of 0.25%

Answer 1

Answer:

Net Asset Value of ETF = $99.75

Explanation:

Net asset value of an ETF

• The net asset value of an ETF represents the value of each share’s portion of the fund’s underlying assets and cash at the end of the trading day.
• ETFs calculate the NAV at 4:00 p.m. Eastern Time after the markets close.
• The NAV is used to compare the performance of different funds, as well as for accounting purposes.
• The ETF also releases its current daily holdings, amount of cash, outstanding shares, and accrued dividends, if applicable.
• For investors, ETFs have the advantage of being more transparent. Mutual funds and closed-end funds do not have to disclose their daily holdings.
• In fact, mutual funds usually disclose their holdings only quarterly.

Calculation

Market Value per share = $100

Expense Ratio = 0.25%

Net Asset Value = Market Value per share * (1 - Expense Ratio)

Net Asset Value = $100 * (1 - 0.0025)

Net Asset Value = $100 * 0.9975

Net Asset Value = $99.75