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Ch.2 · Advantages and Limitations of Mutual Funds · easy

Which of the following is the most accurate definition of a 'unit' in a mutual fund?

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EXPLANATION

A unit represents a proportional share of the scheme's total portfolio. When an investor invests money, they are allotted units at the prevailing NAV. Each unit entitles the holder to a proportional share of the scheme's assets and income.

A.A share of the AMC company held by the investor

B.The minimum investment amount in a mutual fund scheme

C.A proportional share of the scheme's portfolio that an investor holds [✓ Correct]

D.A fixed deposit receipt issued by the mutual fund

EXPLANATION

A unit represents a proportional share of the scheme's total portfolio. When an investor invests money, they are allotted units at the prevailing NAV. Each unit entitles the holder to a proportional share of the scheme's assets and income.

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