Question

From question 10 recall that the City of Ashland Investment Pool has three participants, X, Y, and Z. Their relative equities in the pool at a particular point in time were 45 percent, 30 percent, and 25 percent, respectively. Near the end of the year, participant X withdrew $1,000,000 from the pool after which its share of the pool fell to 40 percent. Which of the following is a true statement after X made its withdrawal?

A) Participant Y's equity in dollars is unchanged.
B) Participant Y's percentage share of future investment earnings and changes in fair value of investments has increased.
C) Participant Z's percentage share of future investment earnings and changes in fair value of investments has increased.
D) All of the above.

Answer 1

After participant X withdrew $1,000,000 from the City of Ashland Investment Pool, the equity distribution among the participants changed. Participant Y's percentage share of future investment earnings and changes in fair value of investments has increased.

Step-by-step explanation:

After participant X withdrew $1,000,000 from the City of Ashland Investment Pool, their share of the pool fell to 40 percent. To determine the impact on the other participants, we can calculate the new equities based on the remaining pool amount and the new percentages.

1. Participant X's equity after the withdrawal is 40% of the remaining pool amount.
2. Participant Y's equity remains unchanged, as they did not make any withdrawal.
3. Participant Z's equity in dollars has increased, as the remaining pool amount is now divided between only two participants (Y and Z).

Therefore, the correct statement is B) Participant Y's percentage share of future investment earnings and changes in fair value of investments has increased.