Products & Their RisksQuestion 74 of 398
When a unit investment trust reaches its predetermined termination date, what typically happens?
a.The underlying securities are sold or distributed and proceeds are returned to unit holders
b.The trust automatically converts into an open-end mutual fund
c.Unit holders must roll their units into a new trust with no option to receive cash
d.The trust continues indefinitely under a newly appointed manager
Explanation
A UIT has a fixed life. When it reaches its stated termination date, the trust dissolves: the underlying portfolio is liquidated or distributed and the proceeds are paid to unit holders. This contrasts with a managed fund, which has no set termination date.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
Related questions on this topic
- Which of the following is generally TRUE of an exchange-traded fund (ETF)?
- An investor wants to place a limit order and trade intraday, and to be able to use stop orders. Compared with a traditional open-end mutual fund, which product better meets these needs?
- A distinguishing feature of a unit investment trust (UIT) is that it:
- To qualify for favorable tax treatment as a real estate investment trust (REIT), the entity must distribute to shareholders at least:
- An investor wants exposure to real estate that generates income from mortgage interest rather than from owning and renting property. Which product best fits?
- In a fixed annuity, who bears the investment risk?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Securities Industry Essentials (SIE) Exam · How we review