Unit prices of a UCITS fund must be valued on which basis?

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Prepare for the QFA Investments Exam 1. Study with flashcards and multiple-choice questions with detailed explanations. Enhance your understanding and succeed on your exam!

Multiple Choice

Unit prices of a UCITS fund must be valued on which basis?

Explanation:
Unit prices are determined from the net asset value per unit. The fund values all assets at fair value, subtracts liabilities to arrive at total net assets, and then divides that amount by the number of units outstanding to get the price at which investors subscribe or redeem. This ensures each unit represents a proportional claim on the fund’s net assets. Using a smoothed average would mask real-time value, and gross asset value would ignore liabilities, overstating the price. Cost plus mark up doesn't reflect the fund's actual value per unit.

Unit prices are determined from the net asset value per unit. The fund values all assets at fair value, subtracts liabilities to arrive at total net assets, and then divides that amount by the number of units outstanding to get the price at which investors subscribe or redeem. This ensures each unit represents a proportional claim on the fund’s net assets. Using a smoothed average would mask real-time value, and gross asset value would ignore liabilities, overstating the price. Cost plus mark up doesn't reflect the fund's actual value per unit.

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