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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 an equity mutual fund at a NAV of Rs 30 and receives a dividend (IDCW) of Rs 2 per unit. The investor later sells all the units at a NAV of Rs 36. What is the total return as a percentage of the original investment, ignoring tax and costs?

The total return is 26.67%. The investment is Rs 30,000, the capital gain is Rs 6,000 and the IDCW received is Rs 2,000, giving a total gain of Rs 8,000. Dividing 8,000 by 30,000 gives the return, because both income and appreciation count.

  1. A20.00%
  2. B26.67%Correct
  3. C6.67%
  4. D16.67%

Explanation

Investment is 1,000 x 30 = Rs 30,000. Capital gain is 1,000 x 6 = Rs 6,000 and IDCW is 1,000 x 2 = Rs 2,000, so total gain is Rs 8,000. Return = 8,000/30,000 = 26.67%. The 20% option ignores the IDCW, and 6.67% counts only the IDCW.

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