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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Operational Aspects of Investment Management

A client invests Rs 1,00,000 in a fund through a SIP of Rs 10,000 per month for 10 months. NAVs at the ten purchase dates are Rs 10, 20, 10, 20, 10, 20, 10, 20, 10, 20. What is the average cost per unit obtained by the client?

The average cost is Rs 13.33 per unit. The client buys 7,500 units for Rs 1,00,000, so the cost is the total invested divided by total units, which is lower than the simple NAV average of Rs 15 because more units are bought when NAV is low.

  1. ARs 15.00
  2. BRs 13.33Correct
  3. CRs 14.00
  4. DRs 16.67

Explanation

Units at NAV 10: 1,000 each x 5 = 5,000. Units at NAV 20: 500 each x 5 = 2,500. Total units 7,500. Average cost = 1,00,000/7,500 = Rs 13.33. Rs 15 is the simple average of NAVs, which is wrong because more units are bought at lower NAV.

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