NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS portfolio was worth ₹50,00,000 at the start of the year and ₹58,00,000 at the end, with no inflows or withdrawals during the year. What is the simple annual return?
The return is 16%. The gain of ₹8,00,000 is divided by the opening value of ₹50,00,000, because return is always measured against the amount invested at the start, not the closing value.
- A14%
- B16%Correct
- C13.8%
- D8%
Explanation
Return = (58,00,000 − 50,00,000) / 50,00,000 = 8,00,000 / 50,00,000 = 16%. Dividing by the ending value gives 13.8%, which uses the wrong base. 14% and 8% do not reconcile with the data.
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