Final answer:
Yes, assets entering a cash and investment pool should be recorded at their fair value. Mutual funds offer a high rate of return and liquidity, with professional management of diversified portfolios.
Step-by-step explanation:
It is true that when a cash and investment pool is created, the assets of each fund entering the pool should be transferred to the pool at their fair value at the date of the transfer. When pooling investments such as mutual funds, the assets must be evaluated to ensure an equitable exchange. Since mutual funds are assets that are considered liquid, determining their fair value is essential to accurately reflect the share each investor holds in the pool.
Investors favor mutual funds as they are easy to convert into cash and are efficiently managed by professional firms. The diversified portfolios within these funds tend to offer higher expected returns without substantial risk. However, the costs associated with these diversified options can be significant.