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CMA Final · Strategic Financial Management · Mutual Funds

A scheme holds securities worth Rs 90,00,000, cash of Rs 10,00,000 and accrued income of Rs 1,00,000. Liabilities are Rs 1,00,000 and the scheme accrues expenses of Rs 1,50,000 not yet paid (not included in liabilities). Units outstanding are 4,00,000. After the year, an investor in a SIP bought Rs 10,000 at NAV 24 and Rs 10,000 at NAV 25 (units to 4 decimals total). Which is the NAV per unit today and the investor's average cost per unit?

NAV is Rs 24.63 and the average SIP cost is Rs 24.49. Net assets are Rs 98,50,000 after deducting liabilities and accrued expenses, divided by 4,00,000 units. The SIP buys more units at the lower price, so the harmonic average cost is below the simple mean of 24.50.

  1. ANAV Rs 24.88; average cost Rs 24.49
  2. BNAV Rs 24.63; average cost Rs 24.49Correct
  3. CNAV Rs 24.63; average cost Rs 24.50
  4. DNAV Rs 25.00; average cost Rs 24.49

Explanation

Net assets = 90,00,000 + 10,00,000 + 1,00,000 - 1,00,000 - 1,50,000 = 98,50,000. NAV = 98,50,000/4,00,000 = 24.625, about Rs 24.63. SIP units = 10,000/24 + 10,000/25 = 416.6667 + 400 = 816.6667; cost 20,000/816.6667 = 24.49. The arithmetic mean 24.50 is the wrong measure, and 24.88 ignores the unpaid accrued expenses.

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