A mutual fund company introduces two schemes i.e. Dividend plan (Plan-D) and Bonus plan (Plan-B). The face value of the unit is 10. On 1-4-2018 Mr.…

CA Final · Advanced Financial Management · MTP · May 2024
A mutual fund company introduces two schemes i.e. Dividend plan (Plan-D) and Bonus plan (Plan-B). The face value of the unit is 10. On 1-4-2018 Mr. K invested - 2,00,000 each in Plan-D and Plan-B when the NAV was - 38.20 and - 35.60 respectively. Both the plans matured on 31-3-2023. Particulars of dividend and bonus declared over the period are as follows: Date Dividend % Bonus Ratio Net Asset Value (₹) Plan D Net Asset Value (₹) Plan B 30-09-2018 10 39.10 35.60 30-06-2019 1:5 41.15 36.25 31-03-2020 15 44.20 33.10 15-09-2021 13 45.05 37.25 30-10-2021 1:8 42.70 38.30 27-03-2022 16 44.80 39.10 11-04-2022 1:10 40.25 38.90 31-03-2023 40.40 39.70 Evaluate the Effective Yield Per Annum in respect of the above two plans. Note: 1. Use following PV Factors: PVIF (2%,5) = 0.9057, PVIF (4%,5) = 0.8219, PVIF (8%,5) = 0.6806, PVIF (13%,5) = 0.5428 2. Round off calculations upto 2 decimal points.

Suggested Answer and Working Notes:

Plan - D Unit acquired = 2,00,000 / 38.20 = 5235.60 Date Units held Dividend % Amount Re-investment Rate New Units Total Units 01.04.2018 5235.60 30.09.2018 5235.60 10 5235.60 39.10 133.90 5369.50 31.03.2020 5369.50 15 8054.25 44.20 182.22 5551.72 15.09.2021 5551.72 13 7217.24 45.05 160.20 5711.92 27.03.2022 5711.92 16 9139.07 44.80 204.00 5915.92 31.03.2023 Maturity Value (₹ 40.40 X 5915.92) 2,39,003.17 Less: Cost of Acquisition 2,00,000.00 Total Gain 39,003.17 ∴ Approximate Effective Yield = (₹ 39,003.17 /2,00,000) × (1/5) × 100 = 3.90% Now more accurate effective yield can be computed by using the IRR method as follows: NPV at 4% = -2,00,000 +1,96,436.71 = -3,563.29 NPV at 2% = -2,00,000 +2,16,465.17 = 16,465.17 IRR= LR + (NPV at LR / (NPV at LR-NPV at HR)) × (HR-LR) = 2% + (16465.17 / (16465.17-(-3563.29))) × (4% - 2%) = 3.64% Plan - B Date Particulars Calculation Working No. of Units NAV (₹) 01.04.2018 Investment 2,00,000/35.60 = 5617.98 5617.98 35.60 30.06.2019 Bonus 5617.98/5 = 1123.60 1123.60 36.25 6741.58 30.10.2021 Bonus 6741.58/8 = 842.70 842.70 38.30 7584.28 11.04.2022 Bonus 7584.28/10 = 758.43 758.43 38.90 8342.71 31.03.2023 Maturity Value 8342.71 x 39.70 = 3,31,205.59 Less: Investment 2,00,000.00 Gain 1,31,205.59 ∴ Approximate Effective Yield = (1,31,205.59 / 2,00,000) × (1/5) × 100 = 13.12% Now more accurate effective yield can be computed by using the IRR method as follows: NPV at 13% = -2,00,000 +1,79,778.39 = -20,221.61 NPV at 8% = -2,00,000 +2,25,418.52 = 25,418.52 IRR= LR + (NPV at LR / (NPV at LR-NPV at HR)) × (HR-LR) = 8% + (25418.52 / (25418.52-(-20221.61))) × (13% -8%) = 10.78%

Topics: Mutual Fund

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