NAV Accounting or Value Per Share Accounting I have searched TMF FAQs and this board prior to asking the following questions. I did not find the answer to these questions, so please excuse me if these have already been answered on this board. Should interest payments and dividends be added at each time step on a cumulative basis? For example: Div/Int Equity Starting Balance 0.00 1,000.00 1/1/2000 1.00 1,001.00 2/1/2000 5.00 1,006.00 On 2-1-2000 we were paid $4 in dividends. In attempting to keep equity correct, so that NAV will be correct, I am calculating a running cumulative total for dividends and interest. Is this correct? Margin: How do we treat margin in using NAV accounting? The amount borrowed does not show up in either NAV or units, but the increase or decrease in the underlying equity can be treated as either a gain or a loss in dividends or interest? The change will affect NAV and not the units. Is this correct?NoYou are calqulating the cost basis of your investment if you are reinvesting the dividends in additional shares.The NAV is the total value of all the investments in a mutual fund divided by the number of shares in the fund. It has nothing to do with what you paid for the shares.Margin does not affect it. The interest you pay is a financing expense. Just like the interest you pay on a mortgage does not increase the value of your home.
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