SIE practice questionmediumUITs — Unit Investment Trusts
Which of the following is a characteristic of a Unit Investment Trust (UIT)?
- AThe portfolio is fixed and unmanaged — securities are held until the trust terminates✓ Correct answer
- BThe portfolio is actively managed and securities are frequently bought and sold
- CUITs issue an unlimited number of units continuously
- DUITs have no sales charges
Explanation
Why A — The portfolio is fixed and unmanaged — securities are held until the trust terminates
UITs hold a fixed portfolio of securities that is NOT actively managed. Securities are selected at inception and generally held until the trust's termination date. This distinguishes UITs from mutual funds (actively managed) and ETFs. UITs have a finite life, issue a fixed number of units, and typically charge a sales load. They pass through income to unitholders.
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