NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
A PMS client invested Rs 50,00,000 at the start of the year. At year end the portfolio value was Rs 56,00,000 after deducting all fees and expenses, and no additional flows occurred. What is the return for the year?
The return is 12 percent. The gain of Rs 6,00,000 (ending Rs 56 lakh minus starting Rs 50 lakh) divided by the initial investment of Rs 50 lakh gives 0.12. The starting value is the correct base because no flows occurred during the year.
- A10%
- B12%Correct
- C14%
- D6%
Explanation
Return = (56,00,000 - 50,00,000) / 50,00,000 = 6,00,000 / 50,00,000 = 12%. Using the ending value as the base would give 10.7%, and 6% results from confusing lakhs with the percentage.
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