NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS investor's portfolio was worth Rs 20,00,000 at the start of the year and Rs 23,00,000 at the end, with no additions or withdrawals during the year. What is the absolute return for the year?
The absolute return is 15%. The gain of Rs 3,00,000 is divided by the opening value of Rs 20,00,000, because return is always measured on the starting capital, and there were no cash flows during the year.
- A13%
- B15%Correct
- C18%
- D30%
Explanation
Absolute return = (23,00,000 - 20,00,000) / 20,00,000 = 3,00,000 / 20,00,000 = 15%. The 13% option wrongly divides the gain by the ending value (3/23). The 30% option misreads the rupee gain in lakhs as a percentage.
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