Adjustments To The Segregated Fund Principal Guarantee
When a withdrawal is made from a segregated fund, the principal guarantee is adjusted using a
- linear reduction or
- proportion reduction
Linear Reduction Method ("dollar for dollar")
The guarantee is reduced based on the dollar amount withdrawn in relation to the original purchase price.
(2)![NewGuarantee = [PurchasePrice - Withdrawals] \times Guarantee \; \%](/local--math/eqs/e4a7f7c0dd24ba5a4a3af5bcf5b532e9.png)
![e.g., \; [10,000 - 1,000] \times 75 \% = 6,750](/local--math/eqs/cc0336121438197d192eaeb1e98f1350.png)
Proportional Reduction Method
The guarantee is reduced in proportion to the number of units redeemed in relation to the number of units at that time.
(4)![NewGuarantee = PurchasePrice \times \left[ \frac{ CurrentMarketValue - Withdrawal}{CurrentMarketValue } \right ] \times Guarantee \; \%](/local--math/eqs/fd9d4b7b08e2ca560e57beff10ecb6e4.png)
![\; 10,000 \times \left[ \frac{ 12,000 - 1,000}{12,000 } \right ] \times 75 \% = 6,875](/local--math/eqs/c70be86d068302db7afe30beb0a06799.png)
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