NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
A PMS portfolio was worth Rs 50,00,000 at the start of the year and Rs 56,50,000 at the end. No cash was added or withdrawn and no fees are considered. The benchmark returned 10%. What was the portfolio's return and its excess return over the benchmark?
The portfolio returned 13%, because the gain of Rs 6,50,000 divided by the opening value of Rs 50,00,000 equals 13%. Subtracting the benchmark's 10% gives an excess return of 3 percentage points over the benchmark.
- A13% and 3%Correct
- B11.5% and 1.5%
- C13% and 2.3%
- D6.5% and -3.5%
Explanation
Return = (56.5 - 50)/50 = 6.5/50 = 13%. Excess return = 13% - 10% = 3%. The 6.5% option wrongly uses the rupee gain in lakhs as a percentage, and 11.5% is a miscalculation.
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