How does the mutual fund differ from a bank run

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Question: A mutual fund has the following assets in its portfolio: $40 million in fixed-income securities and $40 million in stocks at current market values. In the event of a liquidity crisis, it can sell its assets at a 96 percent discount if they are disposed of in two days. It will receive 98 percent if disposed of in four days. Two shareholders, A and B, own 5 percent and 7 percent of equity (shares), respectively.

a.Market uncertainty has caused shareholders to sell their shares back to the investment. What will the two shareholders receive if the mutual fund must sell all its assets in two days? In four days?

b. How does this differ from a bank run? How have bank regulators mitigated the problem of bank runs?

Reference no: EM131633600

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