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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Collective Investment Vehicles

A fund's total expenses charged to the scheme for a year are Rs 1.80 crore and its average daily net assets for the year are Rs 120 crore. If the fund then earns a gross return of 11.5% on assets before expenses, what is the approximate net return to unit holders, ignoring other costs?

The net return is about 10 percent. The expense ratio is Rs 1.80 crore divided by Rs 120 crore, which is 1.5 percent, and subtracting this from the 11.5 percent gross return leaves 10 percent for unit holders.

  1. A10.00%Correct
  2. B11.50%
  3. C13.00%
  4. D9.70%

Explanation

Expense ratio = 1.80 / 120 = 1.5%. Net return = 11.5% - 1.5% = 10.0%. Adding the expense ratio gives 13.00%, which is a wrong sign. Using 11.5% ignores the expense deduction. The 9.70% figure is not derived from the data.

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