NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance
An investor put Rs 1,00,000 in a growth scheme, and after exactly 2 years the investment was worth Rs 1,44,000 with no interim cash flows. What is the annualised (CAGR) return?
The CAGR is 20%. The investment grew 1.44 times over 2 years, and the square root of 1.44 is 1.20, so the compounded yearly return is 20%. Dividing the 44% total by 2 would ignore compounding.
- A22.00%
- B20.00%Correct
- C44.00%
- D12.00%
Explanation
Growth multiple = 1.44, so CAGR = (1.44)^(1/2) - 1 = 1.2 - 1 = 20%. Check: 1.2 x 1.2 = 1.44. The 22% figure is the simple average of the 44% total return (44/2), which ignores compounding.
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