There are two Mutual Funds viz. D Mutual Fund Ltd. and K Mutual Fund Ltd. Each having close ended equity schemes. NAV as on 31-12-2022 of equity…

(a) Working Notes: (I) Decomposition of Funds in Equity and Cash Components D Mutual Fund Ltd. K Mutual Fund Ltd. NAV on 31.12.14 70.71 62.50 % of Equity 99% 96% Equity element in NAV 70 60 Cash element in NAV 0.71 2.50 (II) Calculation of Beta (a) D Mutual Fund Ltd. Sharpe Ratio = 2 = (E(R) - R f ) / σ D = (E(R) - R f ) / 11.25 E(R) - R f = 22.50 Treynor Ratio = 15 = (E(R) - R f ) / β D = 22.50 / β D β D = 22.50/15 = 1.50 (b) K Mutual Fund Ltd. Sharpe Ratio = 3.3 = (E(R) - R f ) / σ K = (E(R) - R f ) / 5 E(R) - R f = 16.50 Treynor Ratio = 15 = (E(R) - R f ) / β K = 16.50 / β K β K = 16.50/15 = 1.10 (III) Decrease in the Value of Equity D Mutual Fund Ltd. K Mutual Fund Ltd. Market goes down by 5.00% 5.00% Beta 1.50 1.10 Equity component goes down 7.50% 5.50% (IV) Balance of Cash after 1 month D Mutual Fund Ltd. K Mutual Fund Ltd. Cash in Hand on 31.12.14 0.71 2.50 Less: Exp. Per month 0.25 0.25 Balance after 1 month 0.46 2.25 (i) NAV after 1 month D Mutual Fund Ltd. K Mutual Fund Ltd. Value of Equity after 1 month 70 x (1 - 0.075) 64.75 60 x (1 - 0.055) 56.70 Cash Balance 0.46 2.25 65.21 58.95 (ii) Computation to find out more beneficial Mutual fund: D Mutual Fund K Mutual Fund E(R) - R F (a) 22.50 16.50 Risk free rate of return (b) 7 7 Expected Return (a+b) = (c) 29.50 23.50 Standard deviation (d) 11.25 5 Risk per unit Return (d/c) 0.38 0.21 Since risk per unit return of D is more than K, hence investor shall choose K Mutual fund from the perspective of risk per unit of return.