Pricing
Chapters in this video
- 0:00 How pooled investment pricing differs by vehicle type
- 1:13 Net Asset Value (NAV): the daily wholesale baseline
- 1:47 Public Offering Price (POP) and the front-end load formula
- 2:37 The exam trap: load percentage is on POP, not NAV
- 3:40 Pricing by vehicle: open-end, closed-end, and ETFs compared
- 5:14 Forward pricing for open-end funds
- 5:38 Premiums, discounts, and why closed-end funds drift
- 6:02 AP arbitrage: the four-step ETF price correction machine
- 6:53 Rapid-fire exam recap
What this video covers
- Why NAV is calculated once daily at 4 p.m. Eastern, and why it serves as the baseline wholesale value for every open-end mutual fund transaction
- How to compute POP from NAV when a front-end sales load applies, and why the load percentage is calculated on the POP rather than the NAV
- The exam trap that makes adding 5% to NAV give the wrong answer, and why dividing by (1 minus the load percentage) is the only correct path
- Why open-end funds always transact at NAV with no premiums or discounts possible, and how forward pricing prevents stale-price exploitation
- How market price can diverge from NAV for closed-end funds and ETFs, and why closed-end funds frequently trade at persistent discounts
- The four-step authorized participant (AP) arbitrage mechanism that keeps ETF market prices tightly anchored to NAV
- The exact timing rule for forward pricing: orders before market close get that day's NAV, orders after get the next business day's NAV
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 66 course also includes adaptive practice questions and spaced-repetition flashcards.