CMA Final · Strategic Financial Management · Mutual Funds
A scheme has an average net asset value of ₹200 crore for the year. It charges expenses of ₹3 crore. Its portfolio purchases were ₹90 crore and sales were ₹70 crore during the year. What are the expense ratio and the portfolio turnover ratio (using the lower of purchases or sales over average net assets)?
The expense ratio is 1.5% (₹3 crore over ₹200 crore average net assets) and portfolio turnover is 35%, found by taking the lower of purchases and sales, which is ₹70 crore, divided by ₹200 crore.
- A1.5%; 35%Correct
- B1.5%; 45%
- C3.0%; 35%
- D1.5%; 80%
Explanation
Expense ratio = 3/200 = 1.5%. Turnover = lower of purchases (90) and sales (70) = 70, divided by 200 = 35%. Using purchases gives 45%, the wrong base.
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