After purchasing units from a mutual fund, Aishwarya's distributions are automatically reinvested back into units. How many units does she own after a distribution of $4 per unit?

Prepare for the Canadian Investment Funds Course exam with flashcards and multiple choice questions. Each question is detailed with hints and explanations. Enhance your readiness today!

To understand why the answer indicates Aishwarya would own 232.14 units after the distribution, it’s crucial to look at the process of reinvesting distributions. When distributions are reinvested, the investor receives additional units based on the distribution amount and the price per unit at the time of reinvestment.

Assuming Aishwarya initially owned a certain number of units, let's denote that number as X. If there was a distribution of $4 per unit, the total amount she receives from her current holdings can be calculated by multiplying the number of units she owns (X) by the distribution amount of $4.

Next, this distribution amount is then used to purchase additional units at the same price that is available at the time of reinvestment. If we assume that the price per unit remains constant at $4 for simplicity, the additional units that Aishwarya would receive can be calculated by dividing the total distribution amount by the price per unit.

This means she would receive X distributions times $4, divided by $4, which would equal X additional units.

Thus, if we assume Aishwarya started with 220 units:

  • The total distribution amount would be 220 units multiplied by $4,
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy