NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Mutual Funds
Rohit invested Rs 1,00,000 in a mutual fund scheme. After 3 years the investment was worth Rs 1,33,100 and no other cash flows occurred. What is the compounded annual growth rate (CAGR)?
The CAGR is 10% per annum. The value grew 1.331 times in three years, and 1.10 cubed equals 1.331, so the annual compounded rate is 10%. Simply dividing the 33.1% absolute gain by three ignores compounding and overstates the rate.
- A11.0% per annum
- B10.0% per annumCorrect
- C9.0% per annum
- D33.1% per annum
Explanation
CAGR = (1,33,100/1,00,000)^(1/3) - 1 = (1.331)^(1/3) - 1. Since 1.1^3 = 1.331, CAGR = 10%. Dividing the total gain of 33.1% by 3 gives about 11.0%, which wrongly ignores compounding. 33.1% is the absolute return.
Did you get it right without looking?
One question tells you little. A timed set on Mutual Funds shows your real accuracy, how long you take and where you lose marks.
More Mutual Funds questions
- Under SEBI's categorisation of mutual fund schemes, which of the following best describes a Sectoral/Thematic equity fund's minimum investme…
- A scheme has a NAV of ₹40.00 at the start of the year. It pays a dividend (IDCW) of ₹4.00 per unit during the year, after which the NAV at y…
- Under SEBI's categorisation of mutual fund schemes, which of the following best describes a 'Dynamic Asset Allocation or Balanced Advantage …
- Mr. Rohit, aged 40, has a moderate risk appetite. A scheme returned 14% in a year with a standard deviation of 10% and a beta of 1.25. The r…
- Ms. Rao invests Rs 50,000 in a mutual fund scheme with an exit load of 1% if units are redeemed within one year. The NAV at purchase is Rs 2…
- A client, Mr. Vikram Shah, invests Rs 12,00,000 in an equity-oriented mutual fund scheme. Net asset value (NAV) at purchase is Rs 40 per uni…