PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

MUTUAL FUNDS
Q1

NAV is the total market value of all the assets held in the mutual fund portfolio less the liabilities,
divided by all the outstanding units. That amounts to nothing but the book value of each unit of
Mutual Fund
The NAV measures how much each share of a mutual fund is worth. So, the NAV of a mutual
fund is the cost of one share of the fund.

NAV =

Statement of Net assets of Mutual fund

(Market value of assets Liabilities)
Particulars

Amount (Rs crores)

Assets
Equity shares

20 x

46

Cash in hand
Bonds and debentures not listed (reduction in value by 20%)
Market value of Listed debentures
Market value of Other fixed interest securities
(to be valued at cost give in ques)
Dividend Accrued

1.23
0.80
8.00
4.50
0.80

Liabilities
Amount payable on shares
Expenditure Accrued
Net Asssets

NAV

(6.32)
(0.75)
54.26

= Rs 271.30 per unit

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q2

I
I
1.7.200
31.3.2001
10,000 @ 10 purch
div 10%
-------------------------------Yield 153.33%

I
31.32002
div 20%

I
31.3.2002
redeemed
11,296.11 units
annualized yield
73.52%

NAV on 31.03.01
Annualised yield as on 31.03.2001

153.33%

Yield for 9 months (1.07.2000 31.03.2001)

x 9 = 115%

x 100

Yield on MF =
1.15

2,05,000

Thus NAV of units at end of the year is 31.03.2001

= 20.50 per unit

X purchased 10,000 units on 1.7.2000 but he redeemed 11.296.11 units on 31.03.2002, this means
that divided received is reinvested and used to purchase new units
Total number of units on 31.03.2001
Units purchased
New units purchased
Dividend received
NAV on 31.03.2001

10,000
10,000
20.50

487.81

Total units on 31.03.2001

10,487.81

NAV on 31.03.02
Opening units
10,487.81 units
Units on 31.03.03
11,296.11 units
Since no dividend is received on 31.03.03
This implies that additional units were purchased
From dividend received on 31.03.02, on the
basis of NAV on 31.03,02
Units purchased on 31.03.02 (11,296.11 10,487.81) 808.30 units
Dividend received on 31.03.02 (0.20 x 10,487.81 x 10)
Rs 20,975.62
NAV on 31.03.02

Rs 25.95 per unit

NAV on 31.03.03
Annualised yield on 31.03.03

73.52%

Yield for 33 months (1.7.200 - 31.03.2003)

x 33

202.18%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Total return on mutual fund of 1,00,000 in 33 months

1,00,000 x 202.18%
Total value of units 0n 31.03.03 (1,00,000 + 2,02,180)
Total number of units on 31.03.03

2,02,180
3,02,180
11,296.11 units

NAV on 31.03.03

Rs 26.751 per unit

Q3

Statement of cash in hand on 30.06.07

Amount received on Issue
(10,00,000 x 17.5)
Amount invested in capital market instruments
Initial Expenses
Sale of securities
Purchase of securities
Fund management expenses (5lakh x 3)
Dividend earned
Earnings distributed among unit holders
80% of { 3 + (125 100)}
Cash in hand on 30.06.07

Rs ( in lakhs)
175
(160)
(9)
125
(90)
(15)
3
(22.4)
6.60

NAV =

NAV on 30.06.07 =
=
=
Q4

NAV

Rs 18.16 / unit

Statement of Net assets

+
-

Rs (in lacs)
180
2
(1)
181

Market value on funds investments

Receivables
Liabilities
Net Assets
NAV =

= 18.10 per unit

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q5

Statement of cash in hand at the end of the year

Amount received on issue of 10,00,000 units @ 10
Investments purchased
Dividend received during the year
Interest on 7% Govt. securities
Interest on 9% Debentures
Interest on 10% Debentures
Operating Expenses
Cash in hand at end of year

100,00,000
(98,00,000)
12,00,000
56,000
45,000
50,000
(5,00,000)
10,51,000

Statement of Net assets at end of the year

Cash in hand

10,51,000

Equity shares

x 175

87,50,000

10% debentures
5,00,000 x 0.95
7% government securities
9% Debentures
Market value of Assets

4,50,000
8,00,000
5,00,000
115,51,000

Number of units

10,00,000

NAV at end of the year =

(ii)

= Rs 11.551 per unit

NAV if dividend of 0.80 Rs per unit is given

Total net assets before dividend
Dividend paid (10,00,000 x 0.80)
Net assets at end of the year

115,51,000
(8,00,000)
107,51,000

NAV at end of the year =

Q6

= 10.751 per unit

Return on M.F =

=
ii.

x 100

x 100

30%

If the aforesaid mutual fund gives dividend of Rs 5 and NAV at the end of the year is Rs 65

x 100

0%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q7

Return on M.F =

x 100

x 100

Annualised return =

Q8

x 12 = 11.25%

Return on M.F =

x 100

Q9

x 100 = 29.23%

Return on M.F =

x 100

x 100

Annualised return =

At the end ( after Q29) pg 17

Q11

Return on M.F =

x 100

Monthly return =

= 0.6375%

x 12 = 7.65% p.a

Q10

Q12

= 0.9375%

x 100 = 4.4%

x 365 x

= 2.23 % per month

NAV at beg
NAV at end

=
=

8.75
9.45

Option 1 =

MF distributed dividend of Rs 0.75 per unit and capital gain of Rs 0.60 per unit

Return on M.F =

x 100

x 100 = 23.42%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Option 2 =

Dividend and Capital gain distribution are reinvested at an Average NAV of 8.65per unit

NAV at beg
NAV at end

=
=

8.75
9.45

Dividend and Capital gain Received

0.75 + 0.60 = 1.35

Unit purchased at NAV of Rs 8.65 per unit

No. of units held by Holder in lieu of 1 unit of MF =

1 + 0.1560

0.1560 units
= 1.1560 units

Return on M.F =

x 100 = 24.85 %

Since return on option 2 is more than return on option 1, so option 2 is better

Q13

Purchase price of I unit of Mutual Fund

Dividend Received @ 13.25% on face value of Rs 10

Rs 24.65
Rs 1.325

No. of units purchased at NAV of Rs 24.35 per unit

0.0544 units

Total unit holdings at the end of the year

1.0544 units

1 + 0.544

NAV at the end of the year

25.75 per unit

Return on M.F =

=
Q14

x 100 = 10.145%

Mr A can earn 16% on his own investment

Expected rate of return of A from Mutual fund = 16%
Initial expenses of Mutual fund
Annual recurring expenses

=
=

5.5%
1.5%

Earnings required from mutual fund to enable A to get return of 16% on his investments
Required return = ( 1 Initial issue) (required return - Annual recurring)
Expenses
on Mutual Fund expenses
16
= ( 1 0.055) ( required return - 1.5)
on Mutual fund
16

Req return
=
on Mutual fund

(0.945) (Req return 1.5)

18.43%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q15

Required return =
14
14.89

Q16

=
=

Recurring Expenses

= 16.5 - 14.89
=
1.61%

Required return =

( 1 Initial issue) (required return - Annual recurring)

Expenses
on Mutual Fund expenses
( 1 - 0.05) ( 34 - 4)
28.5%

=
=
Q17

( 1 Initial issue) (required return - Annual recurring)

Expenses
on Mutual Fund
expenses
( 1 0.06) ( 16.5 - Recurring expenses)
16.5 - Recurring Expenses

Required return =

( 1 Initial issue) (required return - Annual recurring)

Expenses on Mutual Fund
expenses

18.6
0.93
0.07

( 1 x) ( 22 - 2)
( 1 - x)
x

=
=
=

x = 7%
Initial issue expenses are to be of 7%
Q18

Q19

NAV on 8 june 2001

Entry load charged by fund
Exit load

=
=
=

Rs 28.30
1.5%
0.75%

Purchase price

=
=
=

NAV of Unit + Entry load

28.30 + 1.5% x 28.30
28.72

Sale Price

=
=
=
=

NAV of unit - Exit load

28.30 - ( 28.30 x 0.75% )
28.30 - 0.21225
28.087

NAV of equity fund

Entry load charged by fund
Exit load
Purchase price

=
=
=
=

=
=
=

38.125
2.25%
0.25%

NAV of Unit + Entry load

38.125 + 2.25% x 38.125
38.125 +
0.8575
38.98

If Investor wants to invest Rs 64,000, he can buy =

= 1641.86 units

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q20

Q21

th

NAV of Bond on 6 Jan 2002

Entry load charged by fund
Exit load

=
=
=

Rs 25.8750
1.75%
0.50%

Purchase price

=
=
=
=

NAV of Unit + Entry load

25.8750 + 1.75% x 25.8750
25.8750 + 0.4528
26.3278

Sale price

=
=
=
=

NAV of unit - Exit load

25.8750 - 0.50% x 25.8750
25.8750 - 0.1294
25.7456

NAV at the beginning of the year

Entry load
NAV at the end of the year
Exit load

=
=
=
=

Rs12
2%
Rs 12.10
7%

Purchase price

=
=
=

12 + 2% x 12
12 + 0.24
Rs 12.24

Sale Price

=
=
=

12.10 - 7% x 12.10
12.10 - 0.847
11.253

Return on M.F =

x 100 = 4.19%

If investor is a fund manager, he will not pay entry or exit load

Return on M.F =
=
=

x 100
13.33%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q22

NAV in Beginning
NAV after 5 months

=
=

Annualised return

=
=

Q23

Rs 16.45
Rs 16.985

x 12
7.805%

Mr X Plan A
Amount Invested
NAV per unit on 01.04.2001

Rs 5,00,000
Rs 42.18

No. of units purchased

11,853.96 units

Date

Units
Dividend
outstanding rate
-

Dividend Amount

NAV on date New units

of Dividend Purchased
-

1.04.01

15.09.01

Closing
units
11,853.96

11,853.96

15%

Rs 17,780.94
Rs 46.45
[11853.96 x Rs 10 x 0.15]

[17,780.94 46.45]

382.79

12,236.75

31.03.03

12,236.75

20%

Rs 24,473.50
[12,236.75 x 10 x 0.20]

Rs 48.10

508.80
12,745.55
[24473.5048.10]

15.03.04

12,745.55

18%

Rs 22,941.99
[12745.55x10x0.18]

Rs 52.05

440.77
13,186.32
[22941.9952.05]

27.03.06

13,186.32

16%

Rs 21,098.11

Rs 54.10

389.98
13,576.30
[21098.1154.10]

28.02.07

13,576.30

12%

Rs 16,291.56

Rs 55.20

295.14
13,871.44
[13576.3 55.20]

Since all the securities are sold after the expiry of 1 year. Hence they are eligible for long term capital gains
which is exempt.
Annual return
Redeemable value
13,871.44 x 50.10
6,94,959.14
Less
Security transaction tax @ 2%
13,899.18
Net Proceeds
6,81,059.96
Less
Initial Investment
5,00,000
Total return for 7 years
1,81,059.96
Annual return

= 5.17%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Mr Y Plan B
Amount Invested
NAV per unit on 01.04.2001

Rs 5,00,000
Rs 35.02

No. of units purchased

14,277.56

Date

Units
Outstanding

Bonus
Ratio

Bonus units

Total units
After bonus

1.04.01

14,277.56

28.7.02

14,277.56

1:6

x1

16,657.15

= 2,379.59
31.10.03

16,657.15

x1

1:8

18,739.29

= 2082.14
24.03.05

18,739.29

x1

1:11

20,442.86

= 1703.57
28.02.07

20,442.86

1:12

x1

22,146.43

= 1,703.57

Annual Return

Less
Less

Redeemable value
22,146.43 x 34.10
Security transaction tax @ 2%
Net Proceeds
Initial Investment
Total return for 7 years
Annual return

10

7,55,193.26
15,103.87
7,40,089.39
5,00,000
2,40,089.39
= 6.86%

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q24

Mrs Charu Plan A

Period of Investment
Amount Invested
NAV per unit on 01.04.2001

1.4.95 --- 31.7.05

Rs 1,00,000
Rs 10

No. of units purchased

10,000 units

Date

Units
Dividend
outstanding rate
-

Dividend Amount

NAV on date New units

of Dividend Purchased
-

1.04.95

Closing
units
10,000

28.07.99

10,000

20%

Rs 20,000
[10,000 x Rs 10 x 0.20]

Rs 30.70

651.47

10,651.47

[20,000 30.70]

31.03.00

10,651.47

70%

Rs 74,560
[10,651.47 x 10 x 0.70]

Rs 58.42

1,276.28
[74,56058.42]

11,927.75

31.03.03

11,927.75

40%

Rs 47,711
[11,927.75x10x0.40]

Rs 42.18

1131.13
[47,71142.18]

13,058.88

15.03.04

13,058.88

25%

Rs 32,647
[13,058.88x10x0.25]

Rs 46.45

702.85
[32,64746.45]

13,761.73

24.03.05

13,761.73

40%

Rs 55,047
[13,761.73x10x0.40]

Rs 48.10

1144.43
[55,04748.10]

14,906.16

All 14,906.16 units were redeemed on 31.07.05.

Units purchased on 24.03.05 were held for less than 12 months. So capital gain on redemption is STCG
Statement of STCG tax
Redeemable value of 1144.43 units (1144.43 x 53.75)
Less Cost of 1144.43 units (1144.43 x 48.10)
STCG
Tax on STCG (6466.1125 x 0.10)

61,513.1125
55,047
6466.1125
646.61

Security transaction tax on 1144.43 units is not considered for computation of Capital gains, as it is
not allowed as deduction
Annual return
Redeemable value
14,906.16 x 53.75
Less Security transaction tax
8,01,206.10 x 0.2%
Less Tax on STCG
Less Investment
Net return on Investment for 124 months
Average annual return =

x100 x

11

8,01,206.10
(1602.41)
(646.61)
(1,00,000)
6,98,957.08
67.641% p.a

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Mr Anand Plan B
Period of Investment
Amount Invested
NAV per unit on 01.04.2001

1.4.95 --- 31.7.05

Rs 1,00,000
Rs 10

No. of units purchased

10,000 units

Date

Units
Outstanding

Bonus
Ratio

Bonus units

Total units
After bonus

1.04.95

10,000

31.03.2000

10,000

5:4

x5

22,500

= 12,500
31.03.2004

22,500

1:3

x1

30,000

x1

37,500

= 7500
24.03.05

30,000

1:4
= 7500

All 37,500 units were redeemed on 31.07.05.

Units purchased on 24.03.05 were held for less than 12 months. So capital gain on redemption is
STCG
Statement of STCG tax
Redeemable value of 7500 units (7500 x 22.98)
Less Cost of 7500 units
STCG
Tax on STCG (1,72,350 x 0.10)

1,72,350
NIL
172350
17,235

Security transaction tax on 1144.43 units is not considered for computation of Capital gains, as it is
not allowed as deduction
Annual return
Redeemable value
37,500 x 22.98
Less Security transaction tax
8,61,750 x 0.2%
Less Tax on STCG
Less Investment
Net return on Investment for 124 months
Average annual return =

x100 x

12

8,61,750
(1723.50)
(17,235)
(1,00,000)
7,42,791.50
71.88% p.a

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Mr Bacchan Plan C
Period of Investment
Amount Invested
NAV per unit on 01.04.2001

1.4.95 --- 31.7.05

Rs 1,00,000
Rs 10

No. of units purchased

10,000 units

All 37,500 units were redeemed on 31.07.05.

No STCG
Annual return
Redeemable value
10,000 x 82.07
Less Security transaction tax
8,20,700 x 0.2%
Net amount received
Less Investment
Net return on Investment for 124 months
Average annual return

Q25

8,20,700
(1641.40)
8,19,058.60
(1,00,000)
7,19,058.60
x 100 x

Reward to variability or Sharp ratio

Reward to volatility or Treynor ratio

Fund

Return

Raksha

16

1.5

Varsha

12

0.90

Vredhi

14

1,40

Mitra

18

10

0.75

Laheri

15

1.25

Reward to variability

13

= 69.59%

Reward to volatility

= 1.125

=6

= 0.833

= 5.5

= 1.4

=5

= 1.1

= 14.67

= 1.143

= 6.4

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q26

Q27

Reward to variability or Sharp ratio

Reward to volatility or Treynor ratio

Fund

Return

13

16

0.90

17

23

0.86

23

39

1.20

15

25

1.38

Reward to variability

Reward to volatility

= 0.25

= 4.44

= 0.348

= 9.302

= 0.360

= 11.67

= 0.24

= 4.348

Same as Q73 of Derivatives

b.

of portfolio is weighted average of of each security in the portfolio.

Security
Infosys
Hindustan lever
Reliance
Tata Motors

Value

Value x

5,00,000
8,00,000
5,00,000
2,00,000
20,00,000

1.21
0.97
1.09
1.32

6,05,000
7,75,000
5,45,000
2,64,000
21,90,000

Portfolio =
a.

= 1.095

Value of Portfolio at the end of 3 Months and 6 months

of market or Index is 1
3 Months

In 3 Months Index increased from 4200 to 4500

%age increase =

x 100 =

7.143%

Portfolio is more riskier than Market as PORTFOLIO = 1.095

So increase in Portfolio will be =
1.095 x 7.143 = 7.822%
Value of Portfolio after 3 Months =
20,00,000 x 1.07822
=
Rs 21,56,440

14

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

6 Months = In 6 Months Index Increased from 4200 to 4800

% age increase =
Increase in Portfolio will be

x 100 = 14.286%

=
=

1.095 x 14.286%
15.643%

Value of Portfolio after 6 Months=

c.

20,00,000 x 1.15643

Rs 23,12,860

In 3 Months Index increased from 4200 to 4500 and in 6 Months it increased to 4800, This means
that Market is increasing. If Index is increasing, it means that share price will also increase. If
Market is increasing, it is better to invest in security with high , as increase in SecurityPrice will
be more than increase in Market.
So Investor should invest more in Tata Motors, as it has highest (1.32)
Investor requires atleast 10% investment in each security, so he should invest 10% in Infosys,
10% in Hindustan lever and 10% in Reliance, Balance 70% he should invest in Tata Motors.

e. Portfolio in such case would be =

=
=

1.21 x 0.10 + 0.97 x 0.10 + 1.09 x 0.10 + 1.32 x 0.7

1.251

d. Value of Portfolio after 3 Months and 6 Months

3 Months

Increase in Market
Increase in Portfolio
Value of portfolio

6 Months

Increase in Market
Increase in Portfolio
Value of Portfolio

f.

=
=
=
=
=

7,143%
7.143 x 1.251
8.936%
20,00,000 x 1.08936
21,78,720

=
=
=
=
=

14.286%
14.286 x 1.251
17.872%
20,00,000 x 1.17872
23,57,440

After 6 Months Market will start to fall.

Since of each security is higher than market, So fall in Price of each security is higher than fall
in the Price of Market.
It is better to invest in security with lowest i.e Hindustan lever
Since atleast 10% investment in each security is required, so investor will invest 10% each in
Infosys, reliance and Tata Motors and 70% in Hindustan Lever.

15

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Q28
Aggressive
Conservative

20%
15%

Return
16%
13%

a. Co-efficient of variation

Aggressive

1.25

Conservative

1.154

Investor will prefer to invest in conservative fund as it gives risk of 1.154 for return of 1% and
Aggressive fund is giving risk of 1.25 for 1% of return.
b. Investor will invest in both funds if sufficient funds are at his disposal, as such investment will
provide diversification gains and higher return
c.

If investor can borrow @ 10%, he will prefer to invest in fund which carries lower risk premium.
Aggressive

= 0.30

Conservative

= 0.20

Aggressive fund is preferable

d. If investor can borrow or lend, he will choose a market portfolio which carries a lower risk
premium i.e aggressive fund and combine it with risk free securities to reduce portfolio risk.
Q29

Same as 74 of Derivatives
Expected return of each scheme=
A

x 100

x 100
x 100

14.75%

13%

14%

RF + (RM - RF)

=
=

6.83 + 1.46 (12.13 - 6.83)

14.568%

=
=

6.83 + 1.10 (12.13 - 6.83)

12.66%

=
=

6.83 + 1.40 (12.13 - 6.83)

14.25%

Required Return of each scheme

16

PRAVINN MAHAJAN CLASSES 9871255244, 8800684854

Alpha

Expected Return - Required return

14.75 % - 14.568%

0.182

Under priced

13% - 12,66%

0.34

Under priced

14% - 14.25%

-0.25

over priced

Q10

Amount of Investment
NAV at entry date
Number of units purchased
Dividend
Dividend per unit
Period of investment
(days)

50,000
10.50
4761.905
950
0.1995
122

1,00,000
10
10,000
1500
0.15
91

50,000
10
5,000
nil
nil
31

Return on M.F =

Annual =

x 100

= 2.5%

x 365 =

x 100

Annual =

x 365 = 2.835%

Annual =

x 100

x 365 =

17

10.03%

(2) %

(23.548)%

0.9476