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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

A scheme's average daily net assets for a month are Rs 1,200 crore. Its annual total expense ratio is 1.5%. Approximately how much expense can be charged to the scheme for a 30-day month, assuming a 365-day year?

About Rs 1.48 crore can be charged. The annual expense at a 1.5% TER on Rs 1,200 crore is Rs 18 crore, and prorating this for 30 days out of 365 gives roughly Rs 1.48 crore for the month.

  1. ARs 1.48 croreCorrect
  2. BRs 1.80 crore
  3. CRs 12.0 crore
  4. DRs 18.0 crore

Explanation

Annual expenses = 1.5% x 1,200 = Rs 18 crore. For 30 days: 18 x 30/365 = Rs 1.479 crore, about Rs 1.48 crore. Rs 1.80 crore wrongly divides by 10 months, and Rs 18 crore ignores the monthly proration.

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