CMA Final · Strategic Financial Management · Mutual Funds
A mutual fund's NAV was ₹50 at the start of the year. During the year it paid a dividend of ₹3 per unit and a capital gain distribution of ₹2 per unit. The year-end NAV was ₹52. Assuming distributions are not reinvested, what is the annual total return?
The total return is 14%. Income and capital gain distributions of ₹5 plus the NAV appreciation of ₹2 give ₹7 on an opening NAV of ₹50. Counting only distributions gives 10%, and only NAV growth gives 4%.
- A4.0%
- B10.0%
- C14.0%Correct
- D6.0%
Explanation
Total return = (distributions + change in NAV)/opening NAV = (3 + 2 + (52 − 50))/50 = 7/50 = 14%. Distractor 10% counts only distributions; 4% counts only NAV change.
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