The shares trade on an organized stock exchange and the share’s price is set in this market. The shares have a calculated net asset value (NAV), just like open-end mutual funds, and the closed-end fund’s share price may trade at a price that exceeds or falls below the share’s calculated NAV. If the share price trades above its NAV it is said to be trading at a premium to its NAV, and if the share’s price trades below its NAV then the shares are said to be trading at a discount.
The share’s NAV is calculated using the following formula:
NAV per share = NAV of the corporation’s investment portfolio divided by the number of common shares issued and outstanding.