Practical Questions

Question 2. The unit price of Equity Linked Savings Scheme (ELSS) of a mutual fund is ` 10/-. The public
offer price (POP) of the unit is ` 10.204 and the redemption price is ` 9.80. Calculate: (i) Front-end Load
(ii) Back end Load

Question 5. SBI mutual fund has a NAV of ` 8.50 at the beginning of the year. At the end of the year NAV
increases to ` 9.10. Meanwhile fund distributes ` 0.90 as dividend and ` 0.75 as capital gains.

(i) What is the fund’s return during the year?

(ii) Had these distributions been re-invested at an average NAV of ` 8.75 assuming 200 units were
purchased originally. What is the return?

Question 8. A Mutual Fund Co. has the following assets under it on the close of business as on:

1st February 2012 2nd February 2012

Company No. of Shares Market price per share Market price per share

L Ltd 20,000 20.00 20.50

M Ltd 30,000 312.40 360.00

N Ltd 20,000 361.20 383.10

P Ltd 60,000 505.10 503.90

Total No. of Units 6,00,000

(i) Calculate Net Assets Value (NAV) of the Fund.

(ii) Following information is given:

Assuming one Mr. A, submits a cheque of ` 30,00,000 to the Mutual Fund and the Fund manager of this
company purchases 8,000 shares of M Ltd; and the balance amount is held in Bank. In such a case, what
would be the position of the Fund?

(iii) Find new NAV of the Fund as on 2nd February 2012.

Question 14. Mr. X on 1.7.2012, during the initial public offer of a Mutual Fund (MF) invested 1,00,000 at
Face Value of ` 10. On 31.3.2013, the MF declared a dividend of 10% when Mr. X calculated that his
holding period return was 115%. On 31.3.2014, MF again declared a dividend of 20%. On 31.3.2015, Mr.
X redeemed all his investment which had accumulated to 11,296.11 units when his holding period return
was 202.17%. Calculate the NAVs as on 31.03.2013, 31.03.2014 and 31.03.2015.

Question 16. On 1-4-2012 ABC Mutual Fund issued 20 lakh units at ` 10 per unit. Relevant initial
expenses involved were ` 12 lakhs. It invested the fund so raised in capital market instruments to build a
portfolio of ` 185 lakhs. During the month of April 2012 it disposed off some of the instruments costing `
60 lakhs for ` 63 lakhs and used the proceeds in purchasing securities for ` 56 lakhs. Fund management
expenses for the month of April 2012 was ` 8 lakhs of which 10% was in arrears. In April 2012 the fund
earned dividends amounting to ` 2 lakhs and it distributed 80% of the realized earnings. On 30-4-2012
the market value of the portfolio was ` 198 lakhs. Mr. Akash, an investor, subscribed to 100 units on 1-4-
2012 and disposed off the same at closing NAV on 30-4-2012. What was his annual rate of earning?

Question 18. 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 1-4-2005 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 31-3-2010. Particulars
of dividend and bonus declared over the period are as follows:

Date Dividend Bonus Ratio Net Asset Value (`) % Plan D Plan B

30-09-2005 10 39.10 35.60

30-06-2006 1:5 41.15 36.25

31-03-2007 15 44.20 33.10

15-09-2008 13 45.05 37.25

30-10-2008 1:8 42.70 38.30

27-03-2009 16 44.80 39.10

11-04-2009 1:10 40.25 38.90

31-03-2010 40.40 39.70

What is the effective yield per annum in respect of the above two plans?

Question 19. A mutual fund made an issue of 10,00,000 units of ` 10 each on January 01, 2008. No

entry load was charged. It made the following investments:

Particulars `

50,000 Equity shares of ` 100 each @ ` 160 80,00,000

7% Government Securities 8,00,000

9% Debentures (Unlisted) 5,00,000

10% Debentures (Listed) 5,00,000

98,00,000

During the year, dividends of ` 12,00,000 were received on equity shares. Interest on all
types of debt securities was received as and when due. At the end of the year equity shares

and 10% debentures are quoted at 175% and 90% respectively of face value. Other

investments are at par.

Find out the Net Asset Value (NAV) per unit given that operating expenses paid during the

year amounted to ` 5,00,000. Also find out the NAV, if the Mutual fund had distributed a

dividend of ` 0.80 per unit during the year to the unit holders.

Question 22. Five portfolios experienced the following results during a 7- year period:

Portfolio Average Annual

Return (Rp) (%)

Standard

Deviation (Sp)

Correlation with the

market returns (r)

A 19.0 2.5 0.840

B 15.0 2.0 0.540

C 15.0 0.8 0.975

D 17.5 2.0 0.750

E 17.1 1.8 0.600

Market Risk (σm) 1.2

Market rate of Return (Rm) 14.0

Risk-free Rate (Rf) 9.0

Rank the portfolios using (a) Sharpe’s method, (b) Treynor’s method and (c) Jensen’s Alpha

Question 23. There are two Mutual Funds viz. D Mutual Fund Ltd. and K Mutual Fund Ltd. Each having

close ended equity schemes.

NAV as on 31-12-2014 of equity schemes of D Mutual Fund Ltd. is ` 70.71 (consisting 99%
equity and remaining cash balance) and that of K Mutual Fund Ltd. is 62.50 (consisting 96%

equity and balance in cash).

Following is the other information:

Particular Equity Schemes

D Mutual Fund Ltd. K Mutual Fund Ltd.

Sharpe Ratio 2 3.3

Treynor Ratio 15 15

Standard deviation 11.25 5

There is no change in portfolios during the next month and annual average cost is ` 3 per

unit for the schemes of both the Mutual Funds.

If Share Market goes down by 5% within a month, calculate expected NAV after a month for

the schemes of both the Mutual Funds.

For calculation, consider 12 months in a year and ignore number of days for particular

month.

Question 25. Ms. Sunidhi is working with an MNC at Mumbai. She is well versant with the portfolio

management techniques and wants to test one of the techniques on an equity fund she has

constructed and compare the gains and losses from the technique with those from a

passive buy and hold strategy. The fund consists of equities only and the ending NAVs of

the fund he constructed for the last 10 months are given below:

Month Ending NAV (`/unit) Month Ending NAV (`/unit)

December 2008 40.00 May 2009 37.00

January 2009 25.00 June 2009 42.00

February 2009 36.00 July 2009 43.00

March 2009 32.00 August 2009 50.00

April 2009 38.00 September 2009 52.00

a conservative portfolio (of bonds) in the beginning of December 2008 and the total portfolio

was being rebalanced each time the NAV of the fund increased or decreased by 15%.

You are required to determine the value of the portfolio for each level of NAV following the

Constant Ratio Plan.