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

An investor invests Rs 50,000 in a regular plan of an open-ended scheme at a NAV of Rs 25.00 with no entry load. Ignoring stamp duty, how many units are allotted?

The investor receives 2,000 units. Units allotted equal the amount invested divided by the applicable NAV, and since entry load is not permitted in India, the full Rs 50,000 is invested. Rs 50,000 divided by Rs 25 gives 2,000 units.

  1. A1,000 units
  2. B1,250 units
  3. C2,000 unitsCorrect
  4. D2,500 units

Explanation

Units = Amount invested / NAV = 50,000 / 25 = 2,000 units. 1,000 units would come from wrongly using a NAV of Rs 50, and 2,500 units from wrongly using a NAV of Rs 20. SEBI does not permit entry loads, so no deduction applies.

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