TAKING THE SIE EXAM? BE PREPARED FOR QUESTIONS COMPUTING NET ASSET VALUE AND OFFERING PRICE ON MUTUAL FUNDS

If you plan to take the Securities Industry Essentials (SIE) exam, don't sit for the test unless you feel comfortable with calculating net asset value per share and offering price per share for mutual funds.

For example, Johnny sees that the offering price of GHI Fund is $10 per share. GHI Fund carries a sales charge of five percent. From this information, you must be able to calculate the NAV or net asset value per share. Take 95 percent of $10 to give the NAV of $9.50.

Suppose the SIE exam switches the question by giving you the NAV of $9.50 and the sales charge of five percent. Are you able to compute the offering price? Yes, we all know that the answer will be $10, but how do we arrive at this answer?

We cannot multiply $9.50 by 105 percent, because that results in an offering price of $9.975, not the right answer! We must divide $9.50 by (100 percent less the 5 percent sales charge). So, $9.50 divided by 95 percent equals $10, the offering price!

Bob Eder's book, Study for the Securities Industry Essentials (SIE) Exam, can help you prepare for the SIE test. It is available through Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is a member of the Utah State Bar, inactive status.

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