NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
A portfolio is valued at Rs 10,00,000 at the start of a year. It is worth Rs 11,50,000 at year end, with no inflows or outflows in between. What is the portfolio's return for the year?
The return is 15%. The gain of Rs 1,50,000 is divided by the opening value of Rs 10,00,000. Using the ending value as the base would wrongly give 13.04%, because return is always measured on the initial investment.
- A13.04%
- B15.00%Correct
- C11.50%
- D1.50%
Explanation
Return = (11,50,000 - 10,00,000) / 10,00,000 = 1,50,000 / 10,00,000 = 15%. The 13.04% option wrongly uses the ending value as the base. 11.50% mistakes the ratio of ending value to opening value.
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