Qualified Financial Adviser (QFA) Investments Exam 1 Practice Test

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

Smoothed average asset value. Gross asset value. Net asset value. Cost plus mark up.

Correct Answer:

Net asset value.

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.

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