NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
A PMS client invested Rs 60 lakh at the start of the year. At the year-end, the portfolio value was Rs 69 lakh and no cash flows occurred in between. What is the absolute return for the year?
The absolute return is 15 percent. The gain of Rs 9 lakh, which is Rs 69 lakh less Rs 60 lakh, is divided by the opening investment of Rs 60 lakh, the correct base for return.
- A12%
- B15%Correct
- C13.04%
- D9%
Explanation
Return = (69 - 60) / 60 = 9/60 = 15%. Dividing by the ending value gives 13.04%, which uses the wrong base. 9% comes from subtracting the percentages incorrectly, and 12% has no basis in the data.
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