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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance

A scheme's NAV grew from Rs 10.00 to Rs 12.10 over two years with no dividends. What is the compounded annual growth rate (CAGR)?

The CAGR is 10%. NAV grew by a factor of 1.21 over two years, and the square root of 1.21 is 1.10, so the annual compounded rate is 10%. Simply halving the 21% total return would ignore compounding and overstate the annual figure.

  1. A10.00%Correct
  2. B21.00%
  3. C11.00%
  4. D10.50%

Explanation

Growth multiple = 12.10/10 = 1.21. The square root of 1.21 is 1.10, so CAGR is 10%. The 21% figure is the total two-year return, not annualised. The 10.50% figure is the simple average (21/2) and ignores compounding.

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