Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What does the term 'NAV' stand for in the context of mutual funds?

Net Asset Value
Net Average Value
New Account Value
Nominal Annual Value

The correct answer is: Net Asset Value

In the context of mutual funds, 'NAV' stands for Net Asset Value. This term is crucial to understanding how the value of a mutual fund is calculated and reported. The NAV per share is computed by taking the total assets of the fund, subtracting any liabilities, and then dividing this figure by the total number of outstanding shares. This figure represents the price at which investors can buy or sell shares of the mutual fund at the end of each trading day, reflecting the current value of the assets held in the fund. It's an important metric for investors as it gives them a snapshot of the fund's worth, enabling them to make informed decisions about buying or selling their shares.