Consider the recent performance of the closed ended fund. Period NAV (₹) Premium/ Discount % 0 20 0 1 22.5 -5 2 19.5 2.3 3 21 -3.2 4 22.3 4…

(i) Market price after premium/ discount Period NAV (₹) P/D% Premium/ Discount Net (1 - rate) Market Price = NAV X Net 0 20 0 0 0 0.0000 1 22.5 -5 -0.05 0.95 21.3750 2 19.5 2.3 0.023 1.023 19.9485 3 21 -3.2 -0.032 0.968 20.3280 4 22.3 4 0.04 1.04 23.1920 Gain = Sales price 4th year – Investment,23,192 - 20,000 = 3,192 Total Return for holding period = (3192/20000) x 100 = 15.96% Average return per period = 15.96/4 = 3.99% Geometric return per period = (1 + 0.1596) 1/4 - 1 = 1.03771 - 1 = 0.037714 or 3.771% Or Geometric return per period = (23.1920/20) 1/4 - 1 = 1.03771 - 1 = 0.037713 i.e 3.771% (ii) GM growth of NAV Growth rate in NAV = (22.30 -20) / 20 X 100 = 11.50% GM growth in NAV = (1 + 0.115) 1/4 - 1 = 1.027587 – 1 = 0.027587 or 2.76% Or Geometric Growth in NAV = (22.30/20) 1/4 - 1 = 1.027587 – 1 = 0.027587 or 2.76% Growth rate in NAV is lower than return percent Investment return > NAV growth, the market price has increased more than the NAV.