CMFAS M8 Structure & Parties to a Fund question: unit trust

CMFAS M8Structure & Parties to a Fund

A unit trust can best be described as a legal arrangement in which:

A investors' money is pooled and each holds units representing a proportionate beneficial interest
B a bank lends money to investors so they can buy shares directly in their own names
C the manager guarantees investors a fixed annual return on their capital for a set term
D each investor personally and directly owns specific named securities in the portfolio

Show the answer and explanation

Answer: A. investors' money is pooled and each holds units representing a proportionate beneficial interest

A unit trust pools investors' money into one fund; each investor holds units representing a proportionate beneficial interest in the pool, not a loan, guarantee or direct ownership of specific securities.

Common mistake

Treating a unit trust as a lending arrangement, a guaranteed-return product, or direct ownership of individual holdings.

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CMFAS M8 Structure & Parties to a Fund question: unit trust

Answer: A. investors' money is pooled and each holds units representing a proportionate beneficial interest

Common mistake

Related CMFAS M8 questions

CMFAS M8 Structure & Parties to a Fund question: unit trust

Answer: A. investors' money is pooled and each holds units representing a proportionate beneficial interest

Common mistake

Related CMFAS M8 questions