NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information
A mutual fund scheme has a portfolio turnover ratio calculated as the lower of purchases or sales divided by average net assets. During a year, purchases were Rs 90 crore, sales were Rs 60 crore and average net assets were Rs 120 crore. What is the portfolio turnover ratio?
The portfolio turnover ratio is 0.50. It is computed by taking the lower of purchases and sales, which is Rs 60 crore, and dividing by average net assets of Rs 120 crore. Using the higher figure of purchases would wrongly give 0.75.
- A0.50Correct
- B0.75
- C1.25
- D0.67
Explanation
Take the lower of purchases (90) and sales (60), which is 60. Dividing by average net assets of 120 gives 60/120 = 0.50. Using purchases gives 0.75 (wrong base), and the sum of the two over average assets would give 1.25.
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