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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund

An investor buys 1,000 units of a scheme at NAV Rs 20.00 and sells them after 18 months at NAV Rs 26.00. The scheme has no exit load. Ignoring tax and other charges, what is the absolute return and the annualised (simple) return?

Absolute return is (26-20)/20, which is 30%. The holding period is 1.5 years, so the simple annualised return is 30% divided by 1.5, or 20%. Other options use the wrong base or ignore the time period.

  1. A30% absolute; 20% annualisedCorrect
  2. B30% absolute; 30% annualised
  3. C23.08% absolute; 15.38% annualised
  4. D26% absolute; 17.33% annualised

Explanation

Absolute return = (26-20)/20 = 30%. Holding period is 1.5 years, so simple annualised = 30/1.5 = 20%. Option 2 ignores the period, option 3 uses sale NAV as the base, and option 4 subtracts NAV values as percentages incorrectly.

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