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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

A fund's NAV was ₹50.00 at the start of the year. During the year it paid a dividend (IDCW) of ₹4 per unit when the NAV was ₹56, after which the NAV fell by the amount of the payout. The year-end NAV is ₹58.00. Assuming the dividend is not reinvested, what is the absolute return for the year on the opening NAV?

The absolute return is 24%. The gain consists of the NAV rise from ₹50 to ₹58, which is ₹8, plus the ₹4 dividend received, totalling ₹12. Dividing ₹12 by the opening NAV of ₹50 gives 24 percent.

  1. A16%
  2. B24%Correct
  3. C8%
  4. D20%

Explanation

Absolute return = (closing NAV − opening NAV + dividend) / opening NAV = (58 − 50 + 4)/50 = 12/50 = 24%. Ignoring the dividend gives 8/50 = 16%. Subtracting the dividend gives 4/50 = 8%. 20% has no valid basis.

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