NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units
An open-ended equity scheme has an average weekly net asset base of ₹1,000 crore, and its daily expenses are charged on the basis of the annual TER. If the scheme charges a TER of 2% per annum, approximately how much is charged as expenses to the scheme in a 365-day year on a constant ₹1,000 crore corpus?
About ₹20 crore a year. The total expense ratio is a percentage of average net assets, so 2% of ₹1,000 crore equals ₹20 crore. Expenses are accrued daily within the NAV, not billed separately to the investor.
- A₹2 crore
- B₹20 croreCorrect
- C₹200 crore
- D₹0.2 crore
Explanation
TER is expressed as a percentage of average net assets. 2% of ₹1,000 crore = ₹20 crore a year. ₹2 crore would use 0.2%, and the others are decimal slips.
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