NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Operational Aspects of Portfolio Managers
A PMS client invests Rs 50 lakh and the portfolio value at year end is Rs 58 lakh after all fees and expenses, with no additions or withdrawals during the year. What is the client's net return for the year?
The net return is 16%. The gain is Rs 8 lakh (58 lakh minus 50 lakh), and dividing by the opening investment of Rs 50 lakh gives 16%. Dividing by the ending value would wrongly give about 14%.
- A8%
- B14%
- C16%Correct
- D18%
Explanation
Gain = 58 - 50 = Rs 8 lakh. Return = 8/50 = 16%. The 8% option uses the gain in lakh as a percent; 14% divides by the ending value (8/58); 18% is an unsupported figure.
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