What determines the net asset value (NAV) of an ETF share?

The net asset value (NAV) of an ETF share represents the per-share value of the fund's assets after deducting all liabilities. This figure is fundamental to understanding the true worth of an ETF since it provides insight into the underlying value of the securities held within the fund.

NAV is calculated by taking the total value of all the assets in the ETF, such as stocks, bonds, or other investments, and subtracting any liabilities, which could include expenses like management fees or any debts the fund might have incurred. This calculation gives investors a clear picture of what each share of the ETF is actually worth based on the actual holdings rather than just the market price at which shares may trade.

The other options do not accurately represent how NAV is determined. For example, while the total income generated by the ETF can contribute to overall performance, it is not the direct factor in NAV calculation. Similarly, the market price of ETF shares reflects supply and demand dynamics in the stock market and may differ from the NAV. The interest rate charged by the ETF is more relevant to the cost of fund management than to its valuation. Thus, the correct determination of NAV is grounded in the comprehensive assessment of assets and liabilities within the ETF.