Skip to content

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

A distributor invests Rs 2,00,000 for a client in a regular plan with a total expense ratio of 1.80% p.a. The same scheme's direct plan has an expense ratio of 0.80% p.a. Assuming the underlying portfolio return before expenses is 12% p.a. for both plans, by approximately how many rupees will the direct plan's one-year return exceed the regular plan's, ignoring compounding effects?

The direct plan earns about Rs 2,000 more in a year. The expense ratio difference is 1% (1.80% minus 0.80%), and 1% of Rs 2,00,000 equals Rs 2,000. The gap is the cost that pays distribution commission in the regular plan.

  1. ARs 2,000Correct
  2. BRs 3,600
  3. CRs 1,000
  4. DRs 4,000

Explanation

The expense ratio difference is 1.80% - 0.80% = 1.00%. On Rs 2,00,000 this equals Rs 2,000. Rs 3,600 uses only the regular plan's 1.80% expense, Rs 1,000 applies 0.5%, and Rs 4,000 uses 2%.

Did you get it right without looking?

One question tells you little. A timed set on Fund Distribution and Channel Management Practices shows your real accuracy, how long you take and where you lose marks.

Practise Fund Distribution and Channel Management PracticesFree diagnostic mock

More Fund Distribution and Channel Management Practices questions