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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process

A portfolio is worth Rs 10,00,000 at the start of the year. It consists of Rs 6,00,000 in equity that returns 15% and Rs 4,00,000 in debt that returns 5% over the year. What is the portfolio's return for the year?

The portfolio return is 11%. Weighting equity at 60% with a 15% return gives 9%, and debt at 40% with a 5% return gives 2%. Together this is 11%, equal to Rs 1,10,000 of gain on Rs 10,00,000 invested.

  1. A10%
  2. B11%Correct
  3. C9%
  4. D12%

Explanation

Weights are 60% and 40%. Return = 0.6×15% + 0.4×5% = 9% + 2% = 11%. Check: gains are Rs 90,000 + Rs 20,000 = Rs 1,10,000 on Rs 10,00,000, which is 11%. A simple average of 15% and 5% gives 10%, which ignores the weights.

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