CMA Final · Strategic Financial Management · Mutual Funds
An open-ended equity fund began the year with NAV Rs 40.00. During the year it paid a dividend of Rs 3.00 per unit and a capital gains distribution of Rs 2.00 per unit. The year-end NAV was Rs 42.00. Ignoring reinvestment and taxes, what is the total return for the year?
The total return is 17.5%. The NAV rose by Rs 2, and the investor also received Rs 3 dividend and Rs 2 capital gains distribution, giving Rs 7 total benefit on an opening NAV of Rs 40. Seven divided by forty equals 17.5%.
- A5.00%
- B17.50%Correct
- C12.50%
- D10.00%
Explanation
Total return = (change in NAV + distributions) / opening NAV = (42 - 40 + 3 + 2) / 40 = 7/40 = 17.5%. 5% considers only NAV change; 12.5% omits the capital gains distribution of Rs 2.
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