1. On January 1, the shares and prices for a mutual fund at 4:00 PM are as follows:
|
Stock |
Shares owned |
Price |
|
1 |
1,000 |
$1.92 |
|
2 |
5,000 |
$51.18 |
|
3 |
2,800 |
$29.08 |
|
4 |
9,200 |
$67.19 |
|
5 |
3,000 |
$4.51 |
|
Cash |
n.a. |
$5,353.40 |
Stock 3 announces record earnings, and the price of stock 3 jumps to $32.44 in after market trading. If the fund (illegally) allows investors to buy at the current NAV, how many shares will $25,000 buy? If the fund waits until the price adjusts, how many shares can be purchased? What is the gain to such illegal trades? Assume 5,000 shares are outstanding.