After Brian switches his bond from the Managed Fund to the Cash Fund, how many units will he have allocated in the Cash Fund?

• A. €2,309
• B. €3,290
• C. €3,362
• D. €4,687

Answer: (D)

To determine the number of units Brian will have allocated in the Cash Fund after switching from the Managed Fund, it is essential to understand how unit allocation works in the context of investment funds.

When an investor, such as Brian, switches their investment from one fund to another, the value of their investment in the original fund is used to purchase units in the new fund, in this case, the Cash Fund. The number of units allocated in the new fund will depend on the current value of the investment in the Managed Fund and the price per unit of the Cash Fund at the time of the switch.

The correct response indicates that Brian will have €4,687 allocated in the Cash Fund, which implies that this amount reflects either the net value transferred from the Managed Fund or precisely the value equivalent to the units in the Cash Fund he purchases. This also suggests that the Cash Fund has a determined price per unit and that Brian’s total investment value was sufficient to purchase this specific number of units.

Understanding the mechanics of switching funds and how investments translate into units is critical, particularly in the context of calculating returns and managing investment strategies effectively. Having clear knowledge of the underlying calculations helps investors make more informed financial decisions.