NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS portfolio was valued at Rs 20,00,000 at the start of a year and Rs 23,00,000 at the end, with no inflows or withdrawals. 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, not the ending value.
- A13.04%
- B15%Correct
- C3%
- D30%
Explanation
Absolute return = (23,00,000 - 20,00,000) / 20,00,000 = 3,00,000 / 20,00,000 = 15%. The 13.04% figure wrongly uses the ending value as the base. 3% and 30% are arithmetic slips.
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