Net Asset Value (NAV): Formula and Forward Pricing
Net asset value per share equals a fund's total assets minus its liabilities, divided by the number of shares outstanding. Open-end mutual funds are bought and redeemed at the next NAV calculated after the order arrives, typically at the 4:00 p.m. ET market close.
Forward pricing
Mutual fund orders received before the fund's pricing time execute at that day's NAV; orders received afterward execute at the next calculated NAV. Because the price is unknown when the order is placed, this is called forward pricing.
NAV versus market price
Open-end funds always transact at NAV (plus any sales charge). Closed-end funds and ETFs trade on exchanges at market prices that can sit above (premium) or below (discount) NAV.
Frequently asked questions
What is Net Asset Value (NAV)?
Net asset value per share equals a fund's total assets minus its liabilities, divided by the number of shares outstanding. Open-end mutual funds are bought and redeemed at the next NAV calculated after the order arrives, typically at the 4:00 p.m. ET market close.
How does Net Asset Value (NAV) show up on the exam?
The sales charge is added to NAV to get the public offering price (POP). Redemptions occur at NAV, minus any back-end load.
Practice this concept
Sources
- Investment Company Act of 1940, Rule 22c-1
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