Exam CIFC Topic 1 Question 212 Discussion

Explanation
The net asset value per unit (NAVPU) is the price at which mutual fund units are bought and sold. The NAVPU is calculated at the end of each business day, based on the closing market value of the fund's assets and liabilities. When an investor submits an order to buy or sell mutual fund units, the order is processed at the NAVPU of the next valuation date, which is the next business day after the order is received by the fund company. This is called forward pricing. In this case, Derek submits his order to sell 300 units of the Evergreen Canadian Mortgage Fund at 8:00 p.m. EST on Friday, January 6. This is after the cut-off time for that day, which is usually 4:00 p.m. EST. Therefore, his order will be processed at the NAVPU of the next valuation date, which is Monday, January 9. However, since the Evergreen Canadian Mortgage Fund is a money market fund, it has a one-day settlement period, which means that Derek will receive his proceeds on the following business day after his order is processed. Therefore, his proceeds will be based on the NAVPU for Tuesday, January 10. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 4: Mutual Funds, Section 4.4: Buying and Selling Mutual Funds, page 4-161 Forward Pricing Definition - Investopedia2 Money Market Fund Definition - Investopedia3