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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Operational Aspects of Portfolio Managers

A PMS client's portfolio was valued at Rs 50,00,000 at the start of a year. The client added no funds and withdrew none. At year end the portfolio was valued at Rs 56,00,000 before fees. A fixed fee of Rs 50,000 was then charged. What is the post-fee return for the year?

The post-fee return is 11.0%. After deducting the Rs 50,000 fee, the ending value is Rs 55,50,000, a gain of Rs 5,50,000 on Rs 50,00,000 invested. The pre-fee return of 12% overstates what the client actually earned.

  1. A12.0%
  2. B11.0%Correct
  3. C10.0%
  4. D13.0%

Explanation

Ending value after fee = 56,00,000 - 50,000 = 55,50,000. Gain = 5,50,000. Return = 5,50,000 / 50,00,000 = 11.0%. The 12.0% option ignores the fee.

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