Ch.9 · Systematic Transactions — SIP, SWP, STP · medium

Which of the following is the correct treatment of fractional units in a mutual fund purchase?

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EXPLANATION

Mutual fund units are allotted to 3 decimal places (e.g., 23.456 units). This ensures the investor receives units proportional to the exact amount invested at the applicable NAV.

A.Fractional units are rounded up to the nearest whole unit

B.Fractional units are automatically reinvested in the same scheme

C.Fractional units are not permitted; the purchase amount is adjusted

D.Fractional units are allotted and held in the folio up to 3 decimal places [✓ Correct]

EXPLANATION

Mutual fund units are allotted to 3 decimal places (e.g., 23.456 units). This ensures the investor receives units proportional to the exact amount invested at the applicable NAV.

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