In 2024, Mr. Raj, an investor made a lump sum investment in an equity mutual fund that had an entry load of 0.05 per unit. By the end of the year,…
CA Final · Advanced Financial Management · PYQS · September 2025
In 2024, Mr. Raj, an investor made a lump sum investment in an equity mutual fund that had an entry load of 0.05 per unit. By the end of the year, the NAV appreciated by 13.60%. Additionally, the fund declared a total capital gain and dividend of 5.00 per unit, which were reinvested at a year-end NAV of 25. As a result, the investor held 15,000 units at year-end. The fund also charges an exit load of 1% if redeemed within 1 year. The investor is in the 20% tax bracket. Inflation rate during the year is 4.50%. You are to required to (i) Calculate the number of units purchased by Mr. Raj at the beginning of the investment. (ii) Calculate the NAV per unit and the total investment amount made by Mr. Raj at the beginning of the year. (iii) Appraise the return percentage and the real return percentage, if Mr. Raj decided to exit the investment at the end of the year. Calculation up to 2 decimal points.
Suggested Answer and Working Notes:
(i) Let X be the number of units purchased at the beginning of the year, then X + (5.00 / 25.00) * X = 15000 X = 12,500 units Thus, 12,500 units was purchased by Mr. Raj at the beginning of investment. (ii) Let NAV per unit in the beginning of the year is N then N X 1.1360 = 25, N = 22.01 Thus, NAV per unit at the beginning of the year is 22.01 and total investment made by Mr. Raj is: = (₹ 22.01 +0.05) x 12,500 = 2,75,750 (iii) If Mr. Raj decided to exit then Return and Real Return in percentage terms shall be computed as follows: NAV at the end 25 No. of Units 15000 Amount Redeemable 3,75,000 Less: Exit Load 3,750 Amount Received on Redemption of Units 3,71,250 Total Amount Realized 3,71,250 Less: Initial Investment 2,75,750 Return 95,500 Less: Tax @ 20% 19,100 Net Return 76,400 Return in Percentage Terms (₹ 76,400/2,75,750) 27.71% Real Return in Percentage Terms (27.71%/1.045) 26.52% Or Real Return = (1+0.2771) / (1+0.045) - 1 = 22.21%
Topics: Mutual Fund
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