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. It was worth Rs 58,00,000 at year end, with no additions or withdrawals. What is the absolute return for the year?
The absolute return is 16%. The portfolio gained Rs 8,00,000 on an opening value of Rs 50,00,000, and dividing the gain by the starting value gives 16%. Using the ending value as the base would wrongly give about 13.8%.
- A8%
- B14%
- C16%Correct
- D13.8%
Explanation
Gain = 58,00,000 - 50,00,000 = 8,00,000. Return = 8,00,000 / 50,00,000 = 16%. The 14% option wrongly divides the gain by the ending value (8/58 = 13.8%), which uses the wrong base.
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