CMA Final · Strategic Financial Management · Mutual Funds
Mr. Iyer invests Rs 60,000 in a fund at NAV Rs 15.00 with an entry load of 2%. After a year the NAV is Rs 18.00 and he redeems all units with no exit load. What is his absolute return on the Rs 60,000 invested? (Units are fractional; load is deducted from the investment.)
The return is about 17.65%. The entry price including the 2% load is Rs 15.30, so Rs 60,000 buys 3,921.57 units. Redeemed at Rs 18 they are worth Rs 70,588, a gain of Rs 10,588, which is 17.65% of the investment.
- A20.00%
- B17.60%Correct
- C22.45%
- D17.65%
Explanation
Entry price = 15 x 1.02 = Rs 15.30. Units = 60,000/15.30 = 3,921.57. Redemption value = 3,921.57 x 18 = Rs 70,588.24. Return = 10,588.24/60,000 = 17.65%. Hmm, rounding check: 18/15.30 = 1.17647, so return 17.65%.
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