NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS portfolio manager's portfolio value rises from Rs 80 lakh to Rs 92 lakh over one year, with no inflows or withdrawals. What is the absolute return for the year?
The absolute return is 15%. The gain of Rs 12 lakh is divided by the opening value of Rs 80 lakh, because return is always measured on the starting capital, not on the ending value.
- A12%
- B13.04%
- C15%Correct
- D8%
Explanation
Return = (92 - 80) / 80 = 12/80 = 15%. The 12% option wrongly divides the gain of Rs 12 lakh by 100, the 13.04% option divides by the ending value of 92 instead of the opening value, and the 8% option is not derived from the data.
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