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

An open-ended scheme has an opening NAV of Rs 40.00. During the year it earns Rs 6.00 per unit in total return before expenses, and the annual expenses charged are 2% of average net assets, which equals Rs 0.80 per unit. No dividend is paid. What is the closing NAV and the percentage return to the investor?

The closing NAV is Rs 45.20 and the investor return is 13%. Gross gain of Rs 6 less expenses of Rs 0.80 per unit adds Rs 5.20 to the Rs 40 opening NAV, and 5.20 divided by 40 equals 13%. The expense deduction is already reflected in NAV.

  1. ARs 45.20 and 13.0%Correct
  2. BRs 46.00 and 15.0%
  3. CRs 46.80 and 17.0%
  4. DRs 45.20 and 15.0%

Explanation

Closing NAV = 40 + 6 - 0.80 = Rs 45.20. Return = (45.20 - 40)/40 = 13%. Rs 46.00 ignores expenses, while 15% would be the gross return of 6/40.

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