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CA FINAL - SFM

Mutual Funds
Introduction
A trust pools the savings of a number of investors who share a common financial goal. The
money thus collected is then invested in capital market instrument such as shares,
debentures and other securities. The income earned from this investment and capital
appreciation realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a mutual fund is the most suitable investment for the common man
as it offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost.

Returns

Investo
r

Securiti
es

Fund
Manage
r

Question 1 (Adapted)
Consider the following data of a mutual fund scheme :
Particulars
Rs. In crore
Value of investments
2,056.25
Receivables
158.25
Accrued in come
25.75
Other current assets
325.26
Liabilities
449.56
Accrued expenses
52.92
If the number of outstanding units is 200 core and sale charges is 1.5% on the NAV, what is the public
offering price?
Question 2 (Adapted)
The following portfolio details of a fund are available :
Stock
Share
Price (Rs.)
A
2,00,000
35
B
3,00,000
40
C
4,00,000
20
D
6,00,000
25
The Fund has accrued management fees with the portfolio manager totaling Rs. 30,000. There are 40
lakhs share outstanding. What is the NAV of the fund ? if the fund is sold with a front end load of 5%,
what is the sale price ?
Question 3 (Adapted)
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CA FINAL - SFM

Calculate the todays NAV of flexi fund if the following details are given :Yesterdays NAV = Rs. 12.87, Total number of outstanding units: 1.25 Crores Face value = Rs. 10.
Expenses = Rs. 1 lakh [Assumes sale NAV& Repurchase NAV to be Rs. 12.87].
Appreciation of portfolio today
12 lakhs
Units fresh subscription
2 lakhs
Units redemption
0.75 lakhs
Dividend received
1 lakhs
Question 4 (Adapted)
Yesterday's NAV
Number of units outstanding yesterday
Appreciation of the portfolio today
Depreciation of the portfolio today
Realized Gain today
Realized Loss today
Number of units issued today (Net)
Dividend & Interest
Operating Expenses
Compute today's NAV.

12.5
12 lac
30 lac
10 lac
15 lac
12 lac
70000 at NAV
4.5 lac
1.2 lac

Question 5 (Nov 09 8 Marks)


A mutual fund made an issue of 10,00,000 units of Rs. 10 each on January 01, 2008. No
entry load
was charged. It made the following investments :
Rs.
50,000 Equity shares of Rs. 100 each @ Rs.
160
7% Government Securities

80,00,000

9% Debentures (Unlisted)

5,00,000

10% Debentures (Listed)

5,00,000

8,00,000

98,00,000
During the year, dividends of Rs. 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. Other
investments are at par.
Find out the Net Asset Value (NAV) per unit given that operating expenses paid during
the year amounted to Rs. 5,00,000. Also find out the NAV, if the Mutual Fund had
distributed a dividend of Re. 0.80 per unit during the year to the unit holders.

Holding Period Yield


HYP = Dividend distribution + Capital Gain distribution + Capital Appreciation x 100
PP
Where Capital Appreciation = SP PP
PP = NAV + Entry Load
SP = NAV Exit Load
After calculating HYP --- we have to calculate annualized return either by
MMY Multiply Approach

Compiled By Rahul Malkan(RM)

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CA FINAL - SFM
n

EAY Factor Approach i.e (1+r ) 1


Question 6 (Nov 04 6 Marks)
A has invested in three Mutual Fund schemes as per details below:
MF A
MF B
MF C
Date of Investment
1.12.03
1.1.04
1.3.04
Amount of Investment
50,000
1,00,000
50,000
NAV on entry date
10.50
10
10
Dividend received up to 31.3.04
950
1500
Nil
NAV as at 31.3.04
10.40
10.10
9.80
What is the effective yield on per annum basis in respect of each of the three schemes to Mr. A upto
31.03.04?
Question 7 (Nov 09 6 Marks)
Mr. Sinha has invested in three Mutual fund schemes as per details below :
Scheme X
Scheme Y
Date of Investment

Scheme Z

01.12.08

01.01.09

01.03.2009

5,00,000

1,00,000

50,000

Net Asset Value at entry date

10.50

10.00

10.00

Dividend received up to 31.03.2009

9,500

1,500

Nil

NAV as at 31.3.2009

10.40

10.10

9.80

Amount of Investment

You are required to calculate the effective yield on per annum basis in respect of each of the three
schemes to Mr. Sinha up to 31.03.2009.
Question 8 (Nov 03)
A MF that had an NAV of 20 in the beginning of the month made an income and capital gain
distribution of 0.0375 and 0.03 per share respectively during the month, and then ended the month
with an NAV of 20.06. Calculating the monthly return.
Question 9 (June 09 4 Marks)
A mutual fund that had a net asset value of Rs.16 at the beginning of a month, made Income and
capital gain distribution of Re.0.04 and Re.0.03 respectively per unit during the month, and then
ended the month with a net asset value of Rs.16.08. Calculate monthly and annual rate of return.
Question 10 (Nov 03)
Mr. A can earn a return of 10% by investing in equity shares of its own. Now he is considering a
recently announced equity based MF scheme in which initial expenses are 6% and annual recurring
expenses of 2%. How much should the MF earn to provide Mr. A return of 10%?
Question 11 (May 2010)
A Mutual Fund has a NAV of Rs.20 on 1.12.09. During December 2009, it has earned a regular
income of Re.0.03 per unit. On 31.12.09, the NAV was Rs.20.06. Calculate the monthly return and
annual return.
Question 12 (Adapted)
A mutual fund has a net asset value (NAV) of 50 at the beginning of the year a sum of 4 was
distributed as income besides 3 as capital gain distribution. At the end of the year NAV was 55.
Calculate the net return of the year. Suppose the aforesaid mutual fund in the next year gives a
dividend of 5 as income distribution and no capital gains distribution and the NAV at the end of the
second year is 50. What is the return for the second year?
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CA FINAL - SFM

Question 13 (Adapted)
Mr J Purchased an open ended load fund with a NAV of 50 per unit and 3% sales load. One year
later J sold the fund with a NAV of 54 per unit with a back end load of 3% as well. During a year,
fund paid a 0.25 dividend per unit and distributed 0.40 in capital gains per unit. If J invested
10,000 in this fund, what was Js rupee and percentage return over the year. What would have been
the return if this was a no load fund?
Question 14 (May 2006)
A Mutual Fund having 300 units has shown is NAV of Rs.8.75 and Rs. 9.45 at the beginning and at
the end of the year respectively.
The Mutual Fund has given two options:
a) Pay Rs. 0.75 per unit as dividend and Re. 0.60 per unit as a capital gain, or
b) These distributions are to be reinvested at an average NAV of Rs. 8.65 per unit.
What difference it would make in terms of return available and which option is preferable?
Question 15 (Nov 2005 12 Marks)
Sun Moon Mutual Fund (Approved Mutual Fund) sponsored open-ended equity oriented scheme
"Chanakya Opportunity Fund". There were three plans viz. 'A'- Dividend Re-Investment Plan, 'B' Bonus Plan & 'C'- Growth Plan.
At the time of Initial Public Offer on 1-4-1995, Mr. Anand, Mr. Bachhan & Mrs. Charu, three investors invested Rs. 1,00,000 each and chose 'B', 'C' & 'A' Plan respectively.
The History of the Fund is as follows:
Date
Dividend (%) Bonus Net Asset Value per Unit Ratio (FV Rs, 10)
Plan A

Plan B

Plan C

30.70

31.40

33.42

58.42

31.05

70.05

31-10-2003 40

42.18

25.02

56.1$

15-03-2004 25

44.45

29.10

64.28

28-07-1999 20
31-03-2000 70

5:4

31-03-2004

1:3

42.18

20.05

60.12

24-03-2005 40

1:4

48.10

19.95

72.40

53.75

22.98

82.07

31-07-2005

On 31 st July all three investors *redeemed all the balance units. Calculate annual rate of return to
each of the investors.
Consider:
a. Long-term Capital Gain is exempt from Income tax.
b. Short-term Capital Gain is subject to 10% Income tax.
c. Security Transaction Tax 0.2 percent only on sale/*redemption of units.
d. Ignore Education Cess.
Question 16 (Adapted)
(i) A mutual had a net Asset Value (NAV) of Rs. 60 at the beginning of the year. During the year a
sum of Rs. 5 was distributed as dividend besides Rs. 3 as Capital Gains distribution. At the end of the
year NAV was Rs. 70. Calculate total return for the year?
(ii) Suppose the aforesaid mutual fund in the next year give a dividend of Rs. 5 and no of Capital
gains Distribution and NAV at the end of second year is Rs. 65. What is the return for the second
year?
Question 17 (Nov 2008)
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CA FINAL - SFM

T Ltd. has promoted an open-ended equity oriented scheme in 1999 with two plansDividend
Reinvestment Plan (Plan-A) and a Bonus Plan (Plan-B); the face value of the units was Rs. 10 each. X
and Y invested Rs. 5,00,000 each on 1.4.2001 respectively in Plan-A and Plan-B, when the NAV was
Rs. 42.18 for Plan - A and Rs. 35.02 for Plan - B. X and Y both redeemed their units on 31.3.2008.
Particulars of dividend and bonus declared on the units over the period were as follows:
Date
Dividend
Bonus
NAV
15.9.2001

15

Ratio

Plan A
46.45

Plan B
29.10

28.7.2002

1:6

42.18

30.05

31.3.2003

20

48.10

34.95

31.10.2003

1:8

49.60

36.00

15.3.2004

18

52.05

37.00

24.3.2005

1:11

53.05

38.10

27.3.2006

16

54.10

38.40

28.2.2007

12

1:12

55.20

39.10

31.3.2008

50.10

34.10

You are required to calculate the annual return for X and Y after taking into consideration the
following information :
(i)
Securities transaction tax @ 2% on redemption.
(ii)
Liability of capital gains to income tax
(a) Long-term capital gain-exempt; and
(b) Short-term capital gains at 10% plus education cess at 3%.
Question 18 (Nov 2010 10 Marks)
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
Net Asset Value (*)
%
30-09-2005

Ratio

10

30-06-2006

1:5

Plan D

Plan B

39.10

35.60

41.15

36.25

31-03-2007

15

44.20

33.10

15-09-2008/

13

45.05

37.25

42.70

38.30

44.80

39.10

40.25

38.90

40.40

39.70

30-10-2008
27-03-2009

1:8
16

11-04-2009

1:10

31-03-2010

What is the effective yield per annum in respect of the above two plans?
Question 19 (Nov 2010 8 Marks)
An investor purchased 300 units of a Mutual Fund at 12.25 per unit on 31 st December, 2009. As on
31st December, 2010 he has received 1.25 as dividend and 1.00 as capital gains distribution per
unit.
Required:
a. The return on the investment if the NAV as on 31 st December, 2010 is 13.00.
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CA FINAL - SFM

b. The return on the investment as on 31st December, 2010 if all dividends and capital
gains distributions are reinvested into additional units of the fund at 12.50 per unit.
Question 20 (Nov 2011 5 Marks)
Orange purchased 200 units of Oxygen Mutual Fund at 45 per unit on 31 st December, 2009. In
2010, he received 1.00 as dividend per unit and a capital gains distribution of 2 per unit.
Required :
i.
Calculate the return for the period of one year assuming that the NAV as on 31st
December, 2010 was 48 per unit.
ii.
Calculate the return for the period one year assuming that the NAV as on 31 st
December, 2010 was 48 per unit and all dividends and capital gains distributions
have been reinvested at an average price of 46.00 per unit.
Question 21 (May 2012 8 Marks)
A Mutual Fund Co. has the following assets under it on the close of business as on :
Company
No. of Shares 1st February 2012 Market 2nd February, 2012
price per share
Market price per share
L Ltd.

20,000

2.00

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 Rs. 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 22 (Nov 2006 8 Marks)
Mr. X on 1.7.2000, during the initial offer of some Mutual Fund invested in 10,000 units having face
value of Rs. 10 for each unit. On 31.3.2001 dividend operated by the M.F was 10% and Mr. X found
that his annualized was 153.33%. On 31.12.2002, 20% dividend was given, On 31.3.2003 Mr. X
redeemed all his balance of 11,296.11 units when his annualized yield was 73.52%. What are the
NAVs as on 31.3.2001, 31.12.2002 and 31.3.2003 ?

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CA FINAL - SFM

Question 23 (Nov 2011 RTP)


1 April 2009 Fair Return Mutual Fund has the following assets and prices at 4.00st p.m.
Shares
No. of Shares
Market Price Per Share (Rs.)
A Ltd.

10000

19.70

B Ltd.

50000

482.60

C Ltd.

10000

264.40

D Ltd.

100000

674.90

E Ltd.

30000

25.90

No. of units of fund

8,00,000

Please calculate :
1. NAV of the Fund.
2. Assuming Mr. X, a HNI, send a cheque of Rs. 50,00,000 to the Fund and Fund Manager
purchases 18000 shares of C Ltd. and balance is held in bank. Then what will be position
of fund.
3. Now suppose on 2 April 2009 at 4.00 p.m. the market price of shares is as follows :
Shares
Rs.
A Ltd.

20.30

B Ltd.

513.70

C Ltd.
D Ltd.

290.80
671.90

ELtd.

44.20

Then what will be new NAV.


THANKS.

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