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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

A distributor earns trail commission of 0.60% per annum on the average assets under management of a client's folio, calculated and paid monthly on a pro-rata basis. If the folio's average AUM during a month was Rs 24,00,000, what is the commission for that month (assuming a 12-month division of the annual rate)?

The monthly trail commission is Rs 1,200. Annual commission is 0.60% of Rs 24,00,000, which is Rs 14,400, and dividing by 12 months gives Rs 1,200. Rs 14,400 is only the yearly amount, so it is not the monthly figure.

  1. ARs 1,200Correct
  2. BRs 14,400
  3. CRs 2,400
  4. DRs 12,000

Explanation

Annual commission = 0.60% of 24,00,000 = Rs 14,400. Monthly amount = 14,400 / 12 = Rs 1,200. Rs 14,400 is the annual figure, Rs 2,400 uses 0.1% wrongly, and Rs 12,000 misplaces the decimal.

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