Mutual Fund 2

PRAVINN MAHAJAN CLASSES 9354 720 515
MUTUAL FUNDS
Q1 NAV is the total market value of all the assets held in the mutual fund portfolio less the liabilities,
divided by all the outstanding units. That amounts to nothing but the “book value” of each unit of
Mutual Fund
The NAV measures how much each share of a mutual fund is worth. So, the NAV of a mutual
fund is the cost of one share of the fund.
𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑

NAV =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑢𝑛𝑖𝑡𝑠
𝑀. 𝑉 𝑜𝑓 𝑓𝑢𝑛𝑑𝑠 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠 + 𝑅𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒𝑠 + 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝐼𝑛𝑐𝑜𝑚𝑒 + 𝑜𝑡ℎ𝑒𝑟 𝐴𝑠𝑠𝑒𝑡𝑠 − (𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 + 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑢𝑛𝑖𝑡𝑠
Statement of Net assets of Mutual fund

(Market value of assets – Liabilities)
Particulars Amount (Rs crores)
Assets
2,300
Equity shares 20 x 46
1,000
Cash in hand 1.23
Bonds and debentures not listed (reduction in value by 20%) 0.80
Market value of Listed debentures 8.00
Market value of Other fixed interest securities 4.50
(to be valued at cost – give in ques)
Dividend Accrued 0.80
Liabilities
Amount payable on shares (6.32)

Expenditure Accrued (0.75)
Net Assets 54.26
54.26
NAV = = Rs 271.30 per unit
0.20
1
Q2 Statement of Net assets of Mutual fund

(Market value of assets – Liabilities)
Particulars Amount (Rs lac)
Assets
19,975
Equity shares 40 x 63.92
12,500
Cash in hand 2.76
Bonds and debentures not listed (reduction in value by 20%) 2.00
Market value of Listed debentures 7.5
Market value of Other fixed interest securities 9.75 x 96.5/100 9.41
Dividend Accrued 1.95
Liabilities
Amount payable on shares (13.54)

Expenditure Accrued (1.76)
Net Assets 72.24
72.24
NAV = = Rs 26.27 per unit
2.75
Q3 I I I I
1.7.2000 31.3.2001 31.12.2002 31.3.2003
10,000 @ 10 purch div – 10% div 20% redeemed
-------------------------------- 11,296.11 units
Yield 153.33% annualized yield
73.52%
NAV on 31.03.01
Annualised yield as on 31.03.2001 153.33%

153.33
Yield for 9 months (1.07.2000 – 31.03.2001) x 9 = 115%
12
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑖𝑒𝑣𝑒𝑑 + (𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑒𝑛𝑑 − 𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔)

Yield on MF = x 100
𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝐵𝑒𝑔
10,000 + ( x − 1,00,000)
1.15 =
1,00,000
x = 2,05,000
2,05,000
Thus NAV of units at end of the year is 31.03.2001 = 20.50 per unit
10,000
X purchased 10,000 units on 1.7.2000 but he redeemed 11.296.11 units on 31.03.2002, this means
that divided received is reinvested and used to purchase new units
2
Total number of units on 31.03.2001

Units purchased 10,000
New units purchased
Dividend received 10,000
10,000
NAV on 31.03.2001 20.50 487.81
20.50
Total units on 31.03.2001 10,487.81
NAV on 31.03.02
Opening units 10,487.81 units
Units on 31.03.03 11,296.11 units
Since no dividend is received on 31.03.03
This implies that additional units were purchased
From dividend received on 31.03.02, on the
basis of NAV on 31.03,02
Units purchased on 31.03.02 (11,296.11 – 10,487.81) 808.30 units
Dividend received on 31.03.02 (0.20 x 10,487.81 x 10) Rs 20,975.62
20,975.62
NAV on 31.03.02 Rs 25.95 per unit
808.30
NAV on 31.03.03
Annualised yield on 31.03.03 73.52%
73.52
Yield for 33 months (1.7.200 - 31.03.2003) x 33 202.18%
12
Total return on mutual fund of 1,00,000 in 33 months

1,00,000 x 202.18% 2,02,180
Total value of units 0n 31.03.03 (1,00,000 + 2,02,180) 3,02,180
Total number of units on 31.03.03 11,296.11 units
3,02,180
11,296.11
Q4 Statement of cash in hand on 30.06.07

Rs ( in lakhs)
Amount received on Issue (10,00,000 x 17.5) 175
Amount invested in capital market instruments (160)
Initial Expenses (9)
Sale of securities 125
Purchase of securities (90)
Fund management expenses (5lakh x 3) (15)
Dividend earned 3
Earnings distributed among unit holders
80% of { 3 + (125 – 100)} (22.4)
Cash in hand on 30.06.07 6.60
3
𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑

NAV =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑢𝑛𝑖𝑡𝑠
𝑀. 𝑉 𝑜𝑓 𝑓𝑢𝑛𝑑𝑠 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠 + 𝑅𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒𝑠 + 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝐼𝑛𝑐𝑜𝑚𝑒 + 𝑜𝑡ℎ𝑒𝑟 𝐴𝑠𝑠𝑒𝑡𝑠 − (𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 + 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑢𝑛𝑖𝑡𝑠
𝐶𝑎𝑠ℎ 𝑖𝑛 𝐻𝑎𝑛𝑑 𝑜𝑛 30.06.07 + 𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠

NAV on 30.06.07 =
𝑁𝑜.𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
6.60 + 175
=
10
= Rs 18.16 / unit
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 +𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 − 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Q5 NAV =
𝑁𝑜 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
Statement of Net assets

Rs (in lacs)
Market value on funds investments 180
+ Receivables 2
- Liabilities (1)
Net Assets 181
181
NAV = = 18.10 per unit
10
Q6 Statement of cash in hand at the end of the year
Amount received on issue of 10,00,000 units @ 10 100,00,000

Investments purchased (98,00,000)
Dividend received during the year 12,00,000
Interest on 7% Govt. securities 56,000
Interest on 9% Debentures 45,000
Interest on 10% Debentures 50,000
Operating Expenses (5,00,000)
Cash in hand at end of year 10,51,000
Statement of Net assets at end of the year
Cash in hand 10,51,000

80,00,000
Equity shares x 175 87,50,000
160
10% debentures 5,00,000 x 0.95 4,50,000
7% government securities 8,00,000
9% Debentures 5,00,000
Market value of Assets 115,51,000
4
Number of units 10,00,000
115,51,000
NAV at end of the year = = Rs 11.551 per unit
10,00,000
(ii) NAV if dividend of 0.80 Rs per unit is given
Total net assets before dividend 115,51,000

Dividend paid (10,00,000 x 0.80) (8,00,000)
Net assets at end of the year 107,51,000
107,51,000
NAV at end of the year = = 10.751 per unit
10,00,000
𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

𝑑𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑒𝑑 𝑑𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑒𝑑
Q7 Return on M.F = x 100
𝑁𝐴𝑉 𝑎𝑡 𝑡ℎ𝑒 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔
70 + 5 + 3 − 60
= x 100 = 30%
60
ii. If the aforesaid mutual fund gives dividend of Rs 5 and NAV at the end of the year is Rs 65
65 +5 − 70
= x 100 = 0%
70

16.08 + 0.04 + 0.03 − 16

= x 100 = 0.9375%
16
0.9375
Annualised return = x 12 = 11.25%
1

70 + 14 − 65
= x 100 = 29.23%
65
5

20.06 + 0.0375 + 0.03 −20

= x 100 = 0.6375%
20
0.6375
Annualised return = x 12 = 7.65% p.a
1
Q11 A B C
Amount of Investment 50,000 1,00,000 50,000

NAV at entry date 10.50 10 10
Number of units purchased 4761.905 10,000 5,000
Dividend 950 1500 nil
Dividend per unit 0.1995 0.15 nil
Period of investment (days) 122 91 31

Return on M.F =
10.40 + 0.1995 − 10.50 0.0995

A = = x 100 = 0.9476
10.50 10.50
0.9476
Annual = x 365 = 2.835%
122
10.10 + 0.15 − 10 0.25

B = = x 100 = 2.5%
10 10
2.5
Annual = x 365 = 10.03%
91
9.80 + 0 − 10 (𝑜.20)
C = = x 100 = (2) %
10 10
2
Annual = x 365 = (23.548)%
31
6
Q12 MF X MF Y MF Z
i. Number of units in each scheme
Amount of Investment 2,00,000 4,00,000 2,00,000
NAV at time of investment 10.30 10.10 10
Number of units 19,417.48 39,603.96 20,000
ii. Total closing NAV
Closing NAV per unit 10.25 10 10.20
Total NAV 1,99,029.17 3,96,039.6 2,04,000
iii. Total Yield
Change in value of investment - 970.83 - 3960.4 4,000
Dividend 6,000 0 5000
Total return 5,029.17 -3960.4 9,000
Yield on investment 2.515% - 0.99% 4.5%
iv. Number of days investment held

Effective yield per annum 9.66% - 11.66% 24.15%
Number of days of investment
𝑦𝑖𝑒𝑙𝑑 𝑜𝑛 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
x 365 95 days 31 days 68 days
𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑦𝑖𝑒𝑙𝑑 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚
Q13 1. NAV at Beg = Rs 65.78

Annualised return = 15%
Monthly return = 1.25%

Return on M.F = x 100
𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 0.50 + 0.32 − 65.78

0.0125 =
65.78
0.82 = Year end NAV - 64.96
Year end NAV = 65.78
ii. There is no change in NAV.
7

12.25 + 0.50 + 0.30 − 12.50

= x 100 = 4.4%
12.50
4.4 1
Monthly return = x 365 x = 2.23 % per month
60 12
Q15 NAV at beg = 8.75

NAV at end = 9.45
Option 1 = MF distributed dividend of Rs 0.75 per unit and capital gain of Rs 0.60 per unit

Return on M.F = x 100
9.45 + 0.75+ 0.60 − 8.75
= x 100 = 23.42%
8.75
Option 2 = Dividend and Capital gain distribution are reinvested at an Average NAV of 8.65per unit
NAV at beg = 8.75

NAV at end = 9.45
Dividend and Capital gain Received = 0.75 + 0.60 = 1.35
1.35
Unit purchased at NAV of Rs 8.65 per unit = = 0.1560 units
8.65
No. of units held by Holder in lieu of 1 unit of MF = 1 + 0.1560 = 1.1560 units

Return on M.F =
1.1560 𝑋 9.45 − 8.75
= x 100 = 24.85 %
8.75
Since return on option 2 is more than return on option 1, so option 2 is better
8
Q16 (a) (i) Returns for the year

(All changes on a Per -Unit Basis) Rs
Change in Price: 48 – 45 = 3.00
Dividends received: 1.00
Capital gains distribution 2.00
Total reward 6.00
6
Holding period reward: 45
x 100 = 13.33%
(ii) When all dividends and capital gains distributions are re-invested into
additional units of the fund @ (Rs 46/unit)
Dividend + Capital Gains per unit
= 1.00 + 2.00 = 3.00
Total received from 200 units = 3.00 x 200 = 600/-.
Additional Units Acquired = 600/ 46 = 13.04 Units.
Total No.of Units = 200 units + 13.04 units
= 213.04 units.
Value of 213.04 units held at the end of the year = 213.04 units x 48
= 10225.92
Price Paid for 200 Units at the beginning of the year = 200 units x 45
= Rs 9000.00
Holding Period Reward (10225.92 – 9000.00) = Rs1225.92
1225.92
x 100 = 13.62%
9000
Q17 Capital gain & dividend per share Rs 3 per unit

NAV at the end of the year Rs 23.75
3
Number of units purchased at end of year = 0.126316 units
23.75
26,750
Number of units originally purchased = 23,750 units
1.126316
23.75
NAV on date of investment = Rs 20 /unit
1.1875
Amount of investment made in MF 23,750 x 20

= Rs 4,75,000
Entry load on Investment = 23750 x 0.05 = 1,187
9
Q18 Purchase price of I unit of Mutual Fund Rs 24.65

Dividend Received @ 13.25% on face value of Rs 10 Rs 1.325
1.325
No. of units purchased at NAV of Rs 24.35 per unit 0.0544 units
24.35
Total unit holdings at the end of the year 1 + 0.544 1.0544 units
NAV at the end of the year 25.75 per unit

Return on M.F =
1.0544 𝑋 25.75 + 0 + 0 − 24.65

= x 100 = 10.145%
24.65
Q19 Mr A can earn 16% on his own investment

Expected rate of return of A from Mutual fund = 16%
Initial expenses of Mutual fund = 5.5%

Annual recurring expenses = 1.5%
Earnings required from mutual fund to enable A to get return of 16% on his investments
Required return = ( 1 – Initial issue) (required return - Annual recurring)

Expenses on Mutual Fund expenses
16 = ( 1 – 0.055) ( required return - 1.5)
on Mutual fund
16 = (0.945) (Req return – 1.5)
Req return = 18.43%

on Mutual fund
Q20 Required return = ( 1 – Initial issue) (required return - Annual recurring)

14 = ( 1 – 0.06) ( 16.5 - Recurring expenses)
14.89 = 16.5 - Recurring Expenses
Recurring Expenses = 16.5 - 14.89

= 1.61%

= ( 1 - 0.05) ( 34 - 4)
= 28.5%
10

18.6 = ( 1 – x) ( 22 - 2)
0.93 = ( 1 - x)
0.07 = x
x = 7%
Initial issue expenses are to be of 7%
Q23 NAV on 8 june 2001 = Rs 28.30

Entry load charged by fund = 1.5%
Exit load = 0.75%
Purchase price = NAV of Unit + Entry load

= 28.30 + 1.5% x 28.30
= 28.72
Sale Price = NAV of unit - Exit load

= 28.30 - ( 28.30 x 0.75% )
= 28.30 - 0.21225
= 28.087
Q24 NAV of equity fund = 38.125

Exit load = 0.25%

= 38.125 + 2.25% x 38.125
= 38.125 + 0.8575
= 38.98
64,000
If Investor wants to invest Rs 64,000, he can buy = = 1641.86 units
38.98
Q25 NAV of Bond on 6th Jan 2002 = Rs 25.8750

Exit load = 0.50%

= 25.8750 + 1.75% x 25.8750
= 25.8750 + 0.4528
= 26.3278
Sale price = NAV of unit - Exit load

= 25.8750 - 0.50% x 25.8750
= 25.8750 - 0.1294
= 25.7456
11
Q26 NAV at the beginning of the year = Rs12

Entry load = 2%
NAV at the end of the year = Rs 12.10
Exit load = 7%
Purchase price = 12 + 2% x 12
= 12 + 0.24
= Rs 12.24
Sale Price = 12.10 - 7% x 12.10

= 12.10 - 0.847
= 11.253
𝑆𝑎𝑙𝑒 𝑝𝑟𝑖𝑐𝑒+ 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒

Return on M.F =
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒
11.253 + 1.50 − 12.24

= x 100 = 4.19%
12.24
If investor is a fund manager, he will not pay entry or exit load

Return on M.F =
12.10 + 1.50 − 12
= x 100
12
= 13.33%
Q27 NAV in Beginning = Rs 16.45

NAV after 5 months = Rs 16.985
16.985 − 16.45
16.45
Annualised return = x 12
5
= 7.805%
Q28 Front end load is Amount charged by Mutual fund from investor at the time of Purchasing
of Unit over unit price.
10.204 − 10
Front End load is x 100 = 2.04%
10
Back end Load is amount charged by Mutual fund from investor on exit of the scheme or
on selling of the unit.
10−9.8
Back end load is x 100 = 2%
10
12
Q29 Mr X – Plan A
Amount Invested Rs 5,00,000
NAV per unit on 01.04.2001 Rs 42.18
5,00,000
No. of units purchased 11,853.96 units
42.18
Date Units Dividend Dividend Amount NAV on dateNew units Closing
outstanding rate of Dividend Purchased units
- - - - -
1.04.01 11,853.96
15.09.01 11,853.96 15% Rs 17,780.94 Rs 46.45 382.79 12,236.75

[11853.96 x Rs 10 x 0.15] [17,780.94 ÷ 46.45]
31.03.03 12,236.75 20% Rs 24,473.50 Rs 48.10 508.80 12,745.55

[12,236.75 x 10 x 0.20] [24473.50÷48.10]
15.03.04 12,745.55 18% Rs 22,941.99 Rs 52.05 440.77 13,186.32

[12745.55x10x0.18] [22941.99÷52.05]
27.03.06 13,186.32 16% Rs 21,098.11 Rs 54.10 389.98 13,576.30

[21098.11÷54.10]
28.02.07 13,576.30 12% Rs 16,291.56 Rs 55.20 295.14 13,871.44

[13576.3 ÷ 55.20]
Since all the securities are sold after the expiry of 1 year. Hence they are eligible for long term capital gains
which is exempt.
Annual return
Redeemable value 13,871.44 x 50.10 6,94,959.14
Less Security transaction tax @ 2% 13,899.18
Net Proceeds 6,81,059.96
Less Initial Investment 5,00,000
Total return for 7 years 1,81,059.96
1,81,059.96 1
Annual return = x = 5.17%
5,00,000 7
13
Mr Y – Plan B

NAV per unit on 01.04.2001 Rs 35.02
5,00,000
No. of units purchased 14,277.56
35.02
Date Units Bonus Bonus units Total units

Outstanding Ratio After bonus
1.04.01 - - - 14,277.56
14,277.56
28.7.02 14,277.56 1:6 x1 16,657.15
6
= 2,379.59
16,657.15
31.10.03 16,657.15 1:8 x1 18,739.29
8
= 2082.14
18,739.29
24.03.05 18,739.29 1:11 x1 20,442.86
11
= 1703.57
28.02.07 20,442.86 1:12 20,442.86 22,146.43

x1
12
= 1,703.57
Annual Return

Less Security transaction tax @ 2% 15,103.87
Net Proceeds 7,40,089.39
Less Initial Investment 5,00,000
Total return for 7 years 2,40,089.39
2,40,089.39 1
Annual return = x = 6.86%
5,00,000 7
14
Q30 Mrs Charu – Plan A

Period of Investment 1.4.95 --- 31.7.05
NAV per unit on 01.04.2001 Rs 10
1,00,000
No. of units purchased 10,000 units
10
Date Units Dividend Dividend Amount NAV on dateNew units Closing
outstanding rate of Dividend Purchased units
- - - - -
1.04.95 10,000
28.07.99 10,000 20% Rs 20,000 Rs 30.70 651.47 10,651.47

[10,000 x Rs 10 x 0.20] [20,000 ÷ 30.70]
31.03.00 10,651.47 70% Rs 74,560 Rs 58.42 1,276.28 11,927.75

[10,651.47 x 10 x 0.70] [74,560÷58.42]
31.03.03 11,927.75 40% Rs 47,711 Rs 42.18 1131.13 13,058.88

[11,927.75x10x0.40] [47,711÷42.18]
15.03.04 13,058.88 25% Rs 32,647 Rs 46.45 702.85 13,761.73

[13,058.88x10x0.25] [32,647÷46.45]
24.03.05 13,761.73 40% Rs 55,047 Rs 48.10 1144.43 14,906.16

[13,761.73x10x0.40] [55,047÷48.10]
All 14,906.16 units were redeemed on 31.07.05.

Units purchased on 24.03.05 were held for less than 12 months. So capital gain on redemption is STCG
Statement of STCG tax
Redeemable value of 1144.43 units (1144.43 x 53.75) 61,513.1125
Less Cost of 1144.43 units (1144.43 x 48.10) 55,047
STCG 6466.1125
Tax on STCG (6466.1125 x 0.10) 646.61
Security transaction tax on 1144.43 units is not considered for computation of Capital gains, as it is
not allowed as deduction
Annual return
Less Security transaction tax 8,01,206.10 x 0.2% (1602.41)
Less Tax on STCG (646.61)
Less Investment (1,00,000)
Net return on Investment for 124 months 6,98,957.08
698957.08 12
Average annual return = x100 x = 67.641% p.a
1,00,000 124
15
Mr Anand – Plan B

1,00,000
10
Date Units Bonus Bonus units Total units

Outstanding Ratio After bonus
1.04.95 - - - 10,000
10,000
31.03.2000 10,000 5:4 x5 22,500
4
= 12,500
22,500
31.03.2004 22,500 1:3 x1 30,000
3
= 7500
30,000
24.03.05 30,000 1:4 x1 37,500
4
= 7500
All 37,500 units were redeemed on 31.07.05.

Units purchased on 24.03.05 were held for less than 12 months. So capital gain on redemption is
STCG
Statement of STCG tax
Redeemable value of 7500 units (7500 x 22.98) 1,72,350

Less Cost of 7500 units NIL
STCG 172350
Tax on STCG (1,72,350 x 0.10) 17,235
Security transaction tax on 1144.43 units is not considered for computation of Capital gains, as it is
not allowed as deduction
Annual return
Redeemable value 37,500 x 22.98 8,61,750

Less Security transaction tax 8,61,750 x 0.2% (1723.50)
Less Tax on STCG (17,235)
7,42,791 12
Average annual return = x100 x = 71.88% p.a
1,00,000 124
16
Mr Bacchan – Plan C

1,00,000
10
All 37,500 units were redeemed on 31.07.05.

No STCG
Annual return
Redeemable value 10,000 x 82.07 8,20,700

Less Security transaction tax 8,20,700 x 0.2% (1641.40)
Net amount received 8,19,058.60
7,19,058.60 12
Average annual return x 100 x = 69.59%
1,00,000 124
𝑅−𝑅𝐹
Q31 Reward to variability or Sharp ratio =
𝜎
𝑅−𝑅𝐹
Reward to volatility or Treynor ratio =
𝛽
Fund Return σ β Reward to variability Reward to volatility
Raksha 16 8 1.5 16 − 7 16 − 7
= 1.125 =6
8 1.5
Varsha 12 6 0.90 12 − 7 12 − 7
= 0.833 = 5.5
6 0.90
Vredhi 14 5 1,40 14 − 7 14 − 7
= 1.4 =5
5 1.4
Mitra 18 10 0.75 18 − 7 18 − 7
= 1.1 = 14.67
10 0.75
Laheri 15 7 1.25 15 − 7 15 − 7
= 1.143 = 6.4
7 1.25
17
𝑅−𝑅𝐹
𝜎
𝑅−𝑅𝐹
𝛽
Fund Return σ β Reward to variability Reward to volatility
P 13 16 0.90 13 − 9 13 − 9
= 0.25 = 4.44
16 0.90
Q 17 23 0.86 17 − 9 17 − 9
= 0.348 = 9.302
23 0.86
R 23 39 1.20 23 − 9 23 − 9
= 0.360 = 11.67
39 1.20
S 15 25 1.38 15 − 9 15 − 9
= 0.24 = 4.348
25 1.38
Q33 Statement of Beta and Jensen alpha of portfolio

𝜎
Portfolio Beta (r𝜎 𝑀𝐹 ) ER RR = RF + β(RM – RF) JA (ER – RR) Rank
𝑀𝑘𝑡
2.3
A 0.8869 1.2 = 1.70 20 10.1 + 1.7(14.3 – 10.1) 20 – 17.24
= 17.24 = 2.76 II
1.8
B 0.66671.2 = 1 17 10.1 + 1(14.3 – 10.1) 17 – 14.3
=14.3 = 2.7 III
1.6
C 0.6 1.2 = 0.8 18 10.1 + 0.8(14.3 – 10.1) 18 – 13.46
= 13.46 = 4.54 I
1.8
D 0.867 1.2 = 1.3 16 10.1 + 1.3( 14.3 – 10.1) 16 – 15.56
=15.56 0.44 IV
1.9
E 0.54371.2 = 0.86 13.5 10.1 + 0.86(14.3 – 10.1) 13 – 13.712
= 13.712 = - 0.712 V
𝑅−𝑅𝐹
𝜎
𝑅−𝑅𝐹
𝛽
Fund Return σ β Reward to variability Rank Reward to volatility Rank
A 15 7 1.25 15 − 6 2 15 − 6 2
= 1.286 = 7.2
7 1.25
B 18 10 0.75 18 − 6 3 18 − 6 1
= 1.2 = 16
10 0.75
C 14 5 1.40 14 − 6 1 14 − 6 5
= 1.6 = 5.71
5 1.40
D 12 6 0.98 12 − 6 5 12 − 6 4
= 1.00 = 6.12
6 0.98
E 16 9 1.5 16−6 4 16−6 3
9
= 1.11 1.5
= 6.67
18
Q35 Return σ
Aggressive 16% 20%
Conservative 13% 15%
𝜎
a. Co-efficient of variation =
𝑅𝑒𝑡𝑢𝑟𝑛
20
Aggressive = = 1.25
16
15
Conservative = = 1.154
13
Investor will prefer to invest in conservative fund as it gives risk of 1.154 for return of 1% and
Aggressive fund is giving risk of 1.25 for 1% of return.
b. Investor will invest in both funds if sufficient funds are at his disposal, as such investment will
provide diversification gains and higher return
c. If investor can borrow @ 10%, he will prefer to invest in fund which carries lower risk premium.
𝑅−𝑅𝐹 16 − 10
Aggressive = = = 0.30
𝜎 20
𝑅−𝑅𝐹 13 − 10
Conservative = = = 0.20
𝜎 15
Aggressive fund is preferable
d. If investor can borrow or lend, he will choose a market portfolio which carries a lower risk
premium i.e aggressive fund and combine it with risk free securities to reduce portfolio risk.
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝐴𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛

Q36 Expected return of each scheme=
𝑂𝑝.𝑁𝐴𝑉
1.75 + 2.97
A = x 100 = 14.75%
32
0 + 3.53
B = x 100 = 13%
27.15
1.30 + 1.99
C = x 100 = 14%
23.50
Required Return of each scheme = RF + β (RM - RF)
A = 6.83 + 1.46 (12.13 - 6.83)

= 14.568%
B = 6.83 + 1.10 (12.13 - 6.83)

= 12.66%
C = 6.83 + 1.40 (12.13 - 6.83)

= 14.25%
19
Alpha = Expected Return - Required return
A = 14.75 % - 14.568% = 0.182 Under priced
B = 13% - 12,66% = 0.34 Under priced
C = 14% - 14.25% = -0.25 over priced
Q37 a. If return is 29%

Rs
Fixed fee (A) 0.10% of Rs 20 crore 2,00,000
New Fund Value (1.29 x Rs 20 crore) 25.80 crore
Excess Value of best achieved (25.8 crore – 21.0 crore) 4.80 crore
Incentive Fee (2% of 4.80 crores) (B) 9,60,000
Total Fee (A)+(B) 11,60,000
b. If return is 4.5%
Rs
Fixed (A) 0.10% of Rs 20 crore 2,00,000
New Fund Value (1.045 x Rs 20 crore) 20.90 crore
Excess Value of best achieved (20.90 crore –21.00 crore) (Rs 0.10 crore)
Incentive Fee (as does not exceed best achieved) (B) Nil
Total Fee (A)+(B) 2,00,000
c. If return is (-1.8%)
No incentive only fixed fee of Rs 2,00,000 will be paid
Q38 a. Shares No. of shares Price Amount (Rs.)

A Ltd. 10000 19.70 1,97,000
B Ltd. 50000 482.60 2,41,30,000
C Ltd. 10000 264.40 26,44,000
D Ltd. 100000 674.90 674,90,000
E Ltd. 30000 25.90 7,77,000
952,38,000
No.of Units 3,00,000
NAV 119.0475
(b) Cash received Rs 50,00,000

NAV on 1.4.09 119.045
Units purchased by A 42,000
20
The revised position of fund shall be as follows:
Shares No. of shares Price Amount (Rs.)

A Ltd. 10000 19.70 1,97,000
B Ltd. 50000 482.60 2,41,30,000
C Ltd. 28000 264.40 74,03,200
D Ltd. 100000 674.90 674,90,000
E Ltd. 30000 25.90 7,77,000
Cash 2,40,800
10,02,38,000
No. of units of fund = 800000 + 5000000 = 842000
119.0475
NAV 119.0475
(c) On 2nd April 2009, the NAV of fund will be as follows:
Shares No. of shares Price Amount (Rs)
A Ltd. 10000 20.30 2,03,000
B Ltd. 50000 513.70 2,56,85,000
C Ltd. 28000 290.80 81,42,400
D Ltd. 100000 671.90 6,71,90,000
E Ltd. 30000 44.20 13,26,000
Cash 2,40,800
10,27,87,200
NAV as on 2nd April 2009 = 122.08
Q39 Shares No. of shares Price Amount (Rs)

Nairobi Ltd. 25,000 20.00 5,00,000
Dakar Ltd. 35,000 300.00 1,05,00,000
Senegal Ltd. 29,000 380.00 1,10,20,000
Cairo Ltd. 40,000 500.00 2,00,00,000
4,20,20,000
Less: Accrued Expenses 2,50,000

Other Liabilities 2,00,000
Total Value 4,15,70,000
No. of Units 10,00,000
NAV per Unit (4,15,70,000/10,00,000) 41.57
21
Q40 NAV on 31.03.11

Annualised yield as on 31.03.2011 120%
120
Yield for 9 months (1.07.2010 – 31.03.2011) x 9 = 90%
12
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑖𝑒𝑣𝑒𝑑 + (𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑒𝑛𝑑 − 𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔)
Yield on MF = x 100
𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝐵𝑒𝑔
1 + ( x − 10)
0.90 =
10
x = 18
Thus NAV of units at end of the year is 31.03.2011 = 18 per unit
X purchased 5,000 units on 1.7.2011 but he redeemed 6,271.98 units on 31.03.2013, this means that
divided and capital gains received is reinvested and used to purchase new units
Total number of units on 31.03.2011

Units purchased 5,000
New units purchased
Dividend received 5,000
10,000
NAV on 31.03.2001 18 277.78
20.50
Total units on 31.03.2001 5,277.78
NAV on 31.03.12
Opening units 5,277.78 units
Units on 31.03.03 6,271.98 units
Since no dividend is received on 31.03.13
This implies that additional units were purchased
From dividend and capital gains received on 31.03.12, on the
basis of NAV on 31.03,12
Units purchased on 31.03.12 (6271.98 – 5277.78) 994.20 units
Dividend received on 31.03.12 (0.20 x 5277.78 x 10) Rs 10,555.56
Capital gains on 31.03.12 5277.78 x 0.6 3,166.67
13,722.23
994.20
NAV on 31.03.13
Annualised yield on 31.03.03 71.50%
71.50
Yield for 33 months (1.7.2011 - 31.03.2013) x 33 196.625%
12
Total return on mutual fund of 50,000 in 33 months

50,000 x 196.625% 98,312.5
Total value of units 0n 31.03.13 (50,000 + 98,312.5) 148312.5
Total number of units on 31.03.13 6271.98 units
1,48,312.5
6,271.98
22
Q41
1.07.12--------9 m----------31.03.13--------------12 M-----------31.03.14------------12m-----31.3.15
10,000 units @10 10% div 20% div
HPRR – 115% HPRR – 202.17%
11,296.11 units
NAV on 31.03.13
HPRR on 31.03.13 = 115%
𝑑𝑖𝑣 + (𝑐𝑙 𝑁𝐴𝑉 − 𝑜𝑝 𝑁𝐴𝑉)

= 𝑂𝑝 𝑁𝐴𝑉
= 1.15
1 + ( 𝑐𝑙 𝑁𝐴𝑉 − 10)
= 1.15
10
Cl NAV (NAV on 31.03.13) = 20.5
NAV on 31.03.14
All dividend received is reinvested

10,000
Units purchased on 31.03.13 20.5
= 487.80
Total units on 31.03.13 = 10,487.80
Dividend received on 31.03 14 = 10,487.8 x 10 x 0.2 = 20,976
Total units on 31.03.14 = 11,296.11 units
Units purchased on 31.03.14 = 11,296.11 – 10,487.8 = 808.31
20,976
NAV on 31.03.14 = = 25.95
808.31
NAV on 31.03.15
HPRR on 31.03.15 = 202.17%
Value of investment on 1.7.12 = 1,00,000

Return on investment 2,02,170
Value of investment on 31.03.15 = 3,02,170
Number of units on 31,03,15 = 11,296.11
3.02,170
NAV on 31.03.15 = 11,296.11
= 26.75
23
Q42 Statement of cash in hand

Cash received on issue 200 lac
Initial Expenses - 12 lac
Investment - 185 lac
Sale of Investment 63 lac
Purchase of securities - 56 lac
Management Expenses - 7.2 lac
Dividend received 2 lac
Earnings distributed - 4 lac
Closing cash in hand 0.8 lac
Statement of NAV
Investments 198 lac
Closing cash 0.8lac
O/s Expenses (0.8 lac)
NAV 198lac
Units 20 lac
NAV /unit 9.9/unit
Return of Mr A
(2+3 ) 0.8
Dividend and capital gain per unit = = 2
20𝑙𝑎𝑐
Return on M.F =

9.9 + 2 − 10
= x 100 =1%
10
Annul return = 12%
24
Q43 i. Income available for distribution

April income 22.95 lakh
Income collected from 6 lakh units at the time of issue
22.95
X 6 0.459 lakh
300
May income 34.425 lakh
At end of May 3 lakh units were redeemed, so share of these
3 lakh units in income till may will be paid to them
22.95 + 0.459 + 34.425
X3
306
0.189 x 3 (0.567 lakh)
June income 45.450 lakh
102.717 lakh
70 % of income distributed 71.9019
ii. Issue price of 6 lakh units
Op NAV 18.75
+ 2 % entry load (18.75 x 0.02) 0.375
22.95 𝑙𝑎𝑘ℎ
+ Per unit income of April 300 𝑙𝑎𝑘ℎ 𝑢𝑛𝑖𝑡𝑠
0.0765
19.2015
iii. Redemption price per unit of 3 lakh units
Op NAV 18.75
- 2 % exit load 18.75 x 0.02 (0.375)
+ Per unit share of 3lakh units in income
Till may 0.189
18.564
iv Closing NAV
OP NAV 300 x 18.75 5625
+ Income of April 22.95
+6 lakh units issued 19.2015 x 6 115.209
+May income earned 34.425
- 3 lakh units repurchased 3 x 18.564 (55.692)
+ June income 45.45
- 70 % income distributed (71.9019)
+ Portfolio appreciation 425.47
6,140.9101
Units 303
NAV 20.2670
25
Q44 D K
NAV 70.71 62.5
Equity 70.71 x 0.99 70 62.5 x 0.96 60
Cash 0.71 2.5
Sharpe ratio 2 3.3

𝑅−𝑅𝐹 𝑅−𝑅𝐹
=2 = 3.3
𝜎 𝜎
𝑅 − 𝑅𝐹 = 22.5 𝑅 − 𝑅𝐹 = 16.5
𝑅−𝑅𝐹 𝑅−𝑅𝐹
Treynor ratio = 15 = 15
𝛽 𝛽
22.5 16.5
β= 15
= 1.5 β= 15
= 1.1
Share market fell by 5% Equity component of Equity component of

D fell by 1.5 x 5 = 7.5% K fell by 1.1 x 5 = 5.5%
Shares 70 x 0.925 = 64.75 60 x 0.945 = 56.7

Cash 0.71 – 0.25 = 0.46 2.5 – 0.25 = 2.25
NAV after 1 month 65.21 58.95
26

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PRAVINN MAHAJAN CLASSES 9354 720 515

𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑

Statement of Net assets of Mutual fund

Particulars Amount (Rs crores)

Amount payable on shares (6.32)

Q2 Statement of Net assets of Mutual fund

Particulars Amount (Rs lac)

Amount payable on shares (13.54)

Annualised yield as on 31.03.2001 153.33%

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑖𝑒𝑣𝑒𝑑 + (𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑒𝑛𝑑 − 𝑁𝐴𝑉 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔)

Total number of units on 31.03.2001

Total return on mutual fund of 1,00,000 in 33 months

Q4 Statement of cash in hand on 30.06.07

𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑜𝑓 𝐹𝑢𝑛𝑑

𝐶𝑎𝑠ℎ 𝑖𝑛 𝐻𝑎𝑛𝑑 𝑜𝑛 30.06.07 + 𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠

𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠 +𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 − 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Statement of Net assets

Q6 Statement of cash in hand at the end of the year

Amount received on issue of 10,00,000 units @ 10 100,00,000

Statement of Net assets at end of the year

Cash in hand 10,51,000

Number of units 10,00,000

(ii) NAV if dividend of 0.80 Rs per unit is given

Total net assets before dividend 115,51,000

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

16.08 + 0.04 + 0.03 − 16

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

20.06 + 0.0375 + 0.03 −20

Amount of Investment 50,000 1,00,000 50,000

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

10.40 + 0.1995 − 10.50 0.0995

10.10 + 0.15 − 10 0.25

iv. Number of days investment held

Q13 1. NAV at Beg = Rs 65.78

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 0.50 + 0.32 − 65.78

Year end NAV = 65.78

ii. There is no change in NAV.

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

12.25 + 0.50 + 0.30 − 12.50

Q15 NAV at beg = 8.75

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

NAV at beg = 8.75

Dividend and Capital gain Received = 0.75 + 0.60 = 1.35

No. of units held by Holder in lieu of 1 unit of MF = 1 + 0.1560 = 1.1560 units

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

Since return on option 2 is more than return on option 1, so option 2 is better

Q16 (a) (i) Returns for the year

Q17 Capital gain & dividend per share Rs 3 per unit

Amount of investment made in MF 23,750 x 20

Q18 Purchase price of I unit of Mutual Fund Rs 24.65

NAV at the end of the year 25.75 per unit

𝑌𝑒𝑎𝑟 𝑒𝑛𝑑 𝑁𝐴𝑉 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛 − 𝑁𝐴𝑉 𝑎𝑡 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

1.0544 𝑋 25.75 + 0 + 0 − 24.65

Q19 Mr A can earn 16% on his own investment

Initial expenses of Mutual fund = 5.5%

Required return = ( 1 – Initial issue) (required return - Annual recurring)

16 = (0.945) (Req return – 1.5)

Req return = 18.43%

Q20 Required return = ( 1 – Initial issue) (required return - Annual recurring)

Recurring Expenses = 16.5 - 14.89