Chapter 4, Problem 24PS

Summary Introduction

To think critically about:The important factor which effects the investment decision in case of Bond funds and Equity or Stock funds and the reason behind unmanaged unit investment trusts focusing on the fixed-income market.

Introduction:

Management fees: It is a type of fee payable to a person or company which assists in managing a business activity.

Bond fund: It is also called as debt fund. This sort of funds are funds which are invested in bonds or other securities. They function on the fact of paying periodic dividends to bond holders consisting of interest on securities or any realized capital appreciation.

Equity shares: It is a share which resembles ordinary share in nature but consists of partial or fractional ownership. This is the reason behind the equity shareholders becoming members of the company. Being members, they obtain the right to vote also.

Unit investment trusts: When there is a large amount of money being invested with less different portfolio and it is fixed until the fund is matured, these are called unit investment trusts. These are supposed to be less active in management.