A mutual fund offers two plans: Dividend Plan and Bonus Plan. An investor invests - 12,00,000 on 1 April, 2025 in the ratio 60:40 respectively.…

Dividend Plan Particulars Amount in ₹ Investment amount - 12,00,000 X 0.60 (A) 7,20,000.00 NAV per Unit on 1 April 2025 48.00 Entry Load 2% 0.96 Applicable NAV 48.96 No. of Units acquired 14,705.88 Dividend declared on 30 Sep 2025 per unit 5.00 Total Dividend received 73,529.40 NAV per unit on 30 September 2025 (post Dividend) 51.00 New Units acquired 1,441.75 Revised Holding 16,147.63 NAV per unit on 31 March 2026 54.00 NAV post Exit Load 54x 0.99 53.46 Amount realized on maturity (B) 8,63,252.30 Amount of Gain (B) – (A) = (C) 1,43,252.30 Effective Return (C) / (A)% 19.8962% Bonus Plan Particulars Amount in ₹ Investment amount - 12,00,000 X 0.40 (A) 4,80,000.00 NAV per Unit on 1 April 2025 48.00 Entry Load 2% 0.96 Applicable NAV 48.96 No. of Units acquired 9,803.92 Bonus Units declared for every 4 units on 30 September 2025 1.00 Total Bonus Units received 2,450.98 Revised Holding 12,254.90 NAV per unit on 31 March 2026 52.00 NAV post Exit Load 52x 0.99 51.48 Amount realized on maturity (B) 6,30,882.35 Amount of Gain (B) – (A) = (C) 1,50,882.35 Effective Return (C) / (A)% 31.4338% Thus, Bonus Plan provides higher effective return. Alternative Answer Dividend Plan Investment in dividend plan - 12,00,000 x 0.60 = 7,20,000 and Bonus plan = 4,80,000 Number of Units allotted (dividend plan) = 7,20,000 - 14,400 (entry load)/ 48 = 14,700 units Dividend reinvested amount = 14,700 x 5 = 73,500 No of units purchased = 73500 /51 = 1441.18, total holding 14700 + 1441.18 = 16141.18 units Redemption value = 16141.18 x 54 = 8,71,623.72 -8,716.24 = 8,62,907.48 (exit load 1% of 871623) Total wealth = 8,62, 907 Gain = 8,62,907 -7,20,000 = 1,42,907 and holding period return = 1,42,907/7,20,000 = 19.85% Bonus Plan Number of Units allotted (bonus plan) = 4,80,000 -9,600 (entry load)/48 = 9,800 units Bonus = 9800/4 = 2450 units total units 9800 + 2450 = 12250 units Gross redemption value at closing price 12250 x 52 = 6,37,000 After exit load = 6,37,000 - 6,370 = 6,30,630 Total gain = 6,30,630 - 4,80,000 = 1,50,630 Holding period return = 1,50,630/4,80,000 = 31.38% The Bonus Plan gives higher effective return (31.38%) compared to the Dividend Plan (19.85%).