1. Assume that an investor who has invested $50,000 in the active fund decided to withdraw all his/her investment and you need to make the necessary adjustments in the fund. If you have to sell some investments made by the fund to pay for the redemption, explain and justify your reasons why you choose the securities to be excluded from the fund’s investments.
2. Besides potential redemption requests from investors, fund managers will adjust their portfolios based on new market information. Assume that you would like to sell some securities and invest the selling proceeds in other securities as a result of newly arrived information about these securities or their relevant industry. Explain the reasons.