Which of the following is an example of a unit trust?
(A) An investor purchases shares in a public company - HSC - SSCE Business Studies - Question 14 - 2016 - Paper 1
Question 14
Which of the following is an example of a unit trust?
(A) An investor purchases shares in a public company.
(B) Investors lend money directly to businesses and rec... show full transcript
Worked Solution & Example Answer:Which of the following is an example of a unit trust?
(A) An investor purchases shares in a public company - HSC - SSCE Business Studies - Question 14 - 2016 - Paper 1
Step 1
Identify the characteristics of a unit trust
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Answer
A unit trust is a type of collective investment scheme that allows investors to pool their money to invest in a diversified portfolio. The funds are usually managed by a professional investment manager.
Step 2
Evaluate each option
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Answer
Under option (A), buying shares in a public company does not fit the definition of a unit trust as it involves direct ownership rather than pooling resources.
Option (B) involves lending directly to businesses without pooling resources, again not characteristic of a unit trust.
Option (C) describes pooling funds to invest in the property market, which aligns with the definition of a unit trust.
Option (D) involves depositing money with a financial institution, which does not relate to unit trusts.
Step 3
Select the correct answer
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Answer
Based on the evaluations, the correct answer is (C) Investors pool their money together and it is invested in the property market.
