CMA Final · Strategic Financial Management · Mutual Funds
Kaveri Equity Fund began the year with NAV of Rs 40.00. During the year it paid a dividend of Rs 2.00 per unit and a capital gains distribution of Rs 3.00 per unit; closing NAV was Rs 43.00. Assuming no reinvestment, what is the total absolute return for the year?
Absolute return adds the NAV change of Rs 3 and all distributions of Rs 5 (dividend plus capital gains), giving Rs 8 on an opening NAV of Rs 40, which is 20%. Leaving out the capital gains distribution would understate the return.
- A7.5%
- B12.5%
- C20.0%Correct
- D15.0%
Explanation
Total return = (closing NAV - opening NAV + distributions)/opening NAV = (43 - 40 + 2 + 3)/40 = 8/40 = 20%. Counting only the dividend gives 12.5%; ignoring distributions gives 7.5%.
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