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Strategic Financial Management · Mutual Funds

Net Asset Value (NAV) Calculation of a Mutual Fund

Updated 11 October 2026 · Fact-checked

Net Asset Value (NAV) per unit is the fund's net assets divided by units outstanding. Net assets are the market value of investments plus cash and accrued income, minus liabilities and accrued expenses. To solve a question, value every asset at market price, deduct all dues, then divide by the current unit count.

Understand Net Asset Value (NAV) Calculation

A mutual fund pools money from many investors and buys securities. Each investor holds units. The NAV tells you what one unit is worth today, based on what the fund owns after it settles what it owes.

Start with the assets. These are investments at market value (not cost), cash and bank balances, and income earned but not yet received, such as accrued interest or declared dividends. Then subtract liabilities: accrued expenses, management fee payable, and other dues. What is left is the net asset value of the fund as a whole.

Divide that by the number of units outstanding and you get NAV per unit. The NAV changes when market prices change, when income is earned, when expenses accrue, and when the fund pays out a dividend. It does not change just because investors buy or redeem units at NAV.

This last point matters in numericals. If new units are issued at NAV, net assets and units rise in the same proportion, so NAV stays the same. A dividend payout is different. Cash leaves the fund, net assets fall, units stay the same, so NAV falls by the dividend per unit.

Key rules to remember

Net assets
Net assets = Market value of investments + Cash and bank + Accrued income receivable − Liabilities and accrued expenses
Use market value on the valuation date, not cost. Include only dues that are payable.
NAV per unit
NAV per unit = Net assets ÷ Units outstanding
Use the unit count at the same date as the net assets.
Units issued at NAV
New units = Amount received ÷ NAV per unit
NAV stays unchanged immediately after issue. Net assets and units both rise.
Units redeemed at NAV
Units redeemed = Amount paid ÷ NAV per unit
Net assets fall by the payout and units fall by the units cancelled. NAV is unchanged if there is no load.
NAV after a dividend payout
NAV after dividend = (Net assets − Total dividend paid) ÷ Units outstanding
Total dividend = dividend per unit × units. NAV falls by the dividend per unit.
Change in net assets over a period
Closing net assets = Opening net assets + Gain in market value + Income received − Expenses − Dividend paid ± Net unit sales
A quick way to roll NAV forward when the full portfolio is not given.

How to solve Net Asset Value (NAV) Calculation questions

Use this order for any NAV question. It works for simple NAV, NAV with expenses, and NAV after dividends or unit changes.

  1. 1List all assets at market value on the valuation date: investments, cash, and accrued income receivable.
  2. 2List all liabilities: accrued expenses, fees payable and any other dues. Do not include unit capital or reserves.
  3. 3Compute net assets = total assets − total liabilities.
  4. 4Note the units outstanding at that date. Adjust for any units issued or redeemed before the date.
  5. 5Compute NAV per unit = net assets ÷ units.
  6. 6For each later event, update net assets and units separately: dividend reduces net assets only; issue or redemption at NAV changes both.
  7. 7Recompute NAV after each event. Show the working clearly and state the final NAV to the required decimal places.
  8. 8Check: if only units were issued or redeemed at NAV, your NAV must be unchanged.

Quickest way: Roll-forward method

When to use it: Use it when you are given opening NAV and units, plus a list of period events, instead of a full portfolio statement.

  1. Open with net assets = opening NAV × opening units.
  2. Add market gains and income received. Subtract expenses and any dividend paid.
  3. Divide by units to get the NAV before unit transactions.
  4. Apply issues or redemptions at that NAV. Add or remove units and the matching amount.
  5. Recompute NAV only if a dividend or a price is involved after that step. Otherwise it is unchanged.

Common mistakes in Net Asset Value (NAV) Calculation

  • Using cost of investments instead of market value

    Students copy the first figure given for each security.

    Fix: Read the question for the market or current price. Value every holding at that price on the valuation date.

  • Forgetting to deduct accrued expenses or fees payable

    The liabilities are mentioned in a note at the end of the question.

    Fix: Before dividing, scan the whole question for expenses, fees and dues. Deduct every unpaid one.

  • Ignoring income receivable

    Students count only cash and securities.

    Fix: Add accrued interest and declared dividends as assets. Do not add them again once they are received in cash.

  • Changing NAV when new units are issued at NAV

    Students recompute with the new units but forget to add the money received.

    Fix: Add the amount received to net assets and the new units to the unit count. NAV stays the same.

  • Not reducing net assets for a dividend payout

    The dividend is treated as a distribution of income that does not affect NAV.

    Fix: Subtract dividend per unit × units from net assets. NAV falls by the dividend per unit.

  • Using the old unit count after redemptions

    Units outstanding are taken from the opening balance.

    Fix: Update units for every issue and redemption before the final division, and confirm the date.

Worked examples

Example 1

A mutual fund scheme has the following on 31 March: equity shares at market value ₹60,00,000; bonds at market value ₹25,00,000; cash and bank ₹5,00,000; dividend receivable ₹1,00,000; accrued expenses payable ₹2,00,000. Units outstanding are 8,00,000. (a) Compute NAV per unit. (b) The fund pays a dividend of ₹1 per unit out of cash. Compute NAV after the dividend. (c) After the dividend, the fund issues units for ₹20,25,000 at the NAV in (b). Compute the new units issued and the NAV.

Show the solution
  1. (a) Total assets = 60,00,000 + 25,00,000 + 5,00,000 + 1,00,000 = ₹91,00,000.
  2. Net assets = 91,00,000 − 2,00,000 = ₹89,00,000.
  3. NAV = 89,00,000 ÷ 8,00,000 = ₹11.125 per unit.
  4. (b) Dividend paid = ₹1 × 8,00,000 = ₹8,00,000.
  5. Net assets after dividend = 89,00,000 − 8,00,000 = ₹81,00,000.
  6. NAV = 81,00,000 ÷ 8,00,000 = ₹10.125.
  7. (c) New units = 20,25,000 ÷ 10.125 = 2,00,000 units.
  8. Net assets = 81,00,000 + 20,25,000 = ₹1,01,25,000. Units = 8,00,000 + 2,00,000 = 10,00,000.
  9. NAV = 1,01,25,000 ÷ 10,00,000 = ₹10.125, unchanged.

Answer: (a) NAV = ₹11.125. (b) NAV after dividend = ₹10.125. (c) 2,00,000 new units are issued and NAV remains ₹10.125.

Example 2

A scheme starts the month with 5,00,000 units and an NAV of ₹12.40. During the month, its investments gain ₹3,50,000 in market value, it receives dividend income of ₹1,20,000 in cash, and it pays expenses of ₹90,000 in cash. At month-end, investors redeem 50,000 units at NAV (no exit load). The fund then pays a dividend of ₹1 per unit on the remaining units. Find the NAV at each stage.

Show the solution
  1. Opening net assets = 5,00,000 × 12.40 = ₹62,00,000.
  2. Closing net assets before redemption = 62,00,000 + 3,50,000 + 1,20,000 − 90,000 = ₹65,80,000.
  3. NAV = 65,80,000 ÷ 5,00,000 = ₹13.16.
  4. Redemption amount = 50,000 × 13.16 = ₹6,58,000.
  5. Net assets after redemption = 65,80,000 − 6,58,000 = ₹59,22,000. Units = 4,50,000.
  6. NAV = 59,22,000 ÷ 4,50,000 = ₹13.16, unchanged.
  7. Dividend = ₹1 × 4,50,000 = ₹4,50,000.
  8. Net assets = 59,22,000 − 4,50,000 = ₹54,72,000.
  9. NAV = 54,72,000 ÷ 4,50,000 = ₹12.16.

Answer: NAV before redemption is ₹13.16. It stays ₹13.16 after redemption. After the ₹1 dividend, NAV is ₹12.16.

Exam tips

  • Write the net assets statement as a small list: assets, then liabilities, then the difference. Examiners award marks for each component.
  • Keep three decimal places in NAV when the division is not exact. Round only the final answer if the question says so.
  • Read the last sentence first. Questions often ask for NAV after an event, not the opening NAV.
  • In MCQs, check whether the dividend is declared but unpaid. If unpaid, it is a liability. If paid, cash has already left.
  • Link NAV questions to sale and repurchase price. Loads are applied on NAV, so a wrong NAV will carry into later parts.

Practice questions from Mutual Funds

Net Asset Value (NAV) Calculation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Net Asset Value (NAV) Calculation: frequently asked questions

What is the formula for NAV per unit?

NAV per unit = (market value of investments + cash and accrued income − liabilities and accrued expenses) ÷ units outstanding. Use market values on the valuation date.

Does NAV change when new units are issued?

Not if units are issued at the prevailing NAV. Net assets rise by the money received and units rise by the same proportion, so NAV stays the same.

How does a dividend affect NAV?

A dividend payout takes cash out of the fund. Net assets fall by the total dividend and units stay the same, so NAV falls by the dividend per unit.

Do expenses reduce NAV?

Yes. Expenses paid reduce cash and expenses accrued but unpaid are liabilities. Either way net assets fall, so NAV falls.

Should I use cost or market value of securities?

Use market value on the valuation date. Cost is used only if the question explicitly says to value on that basis.