NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
A PMS client's portfolio is valued at Rs 10,00,000 at the start of the year. It is Rs 11,50,000 at year-end, with no additions or withdrawals during the year. What is the simple return for the year?
The return is 15%. The gain of Rs 1,50,000 is divided by the opening value of Rs 10,00,000. The return must be measured on the starting capital, not the ending value, and no cash flows occurred during the year that would alter the calculation.
- A13%
- B15%Correct
- C11.5%
- D17.4%
Explanation
Return = (11,50,000 - 10,00,000) / 10,00,000 = 1,50,000 / 10,00,000 = 15%. Option 13% is not derived from the data. Using the ending value as the base gives 1,50,000/11,50,000 = 13.04%, which is the wrong base. Option 11.5% mistakes the ratio of ending to starting value for return, and 17.4% is unsupported.
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