NISM V-A NAV, Total Expense Ratio and Unit Pricing — Practice Questions
Practise the arithmetic at the heart of the exam: how NAV is computed, what the Total Expense Ratio may include and cap at, how loads and cut-off timings affect the price an investor gets, and how applicable NAV is determined.
93 questions on NAV, TER & Pricing in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Computing NAV
- Total Expense Ratio limits
- Entry/exit loads
- Cut-off timing and applicable NAV
Free sample questions
1. In which of the following case can a mutual fund charge the additional expense of 0.30 % of daily net assets of the scheme ?
- A. When the new inflows from beyond top 30 cities is at least i) 30% of the gross new inflows in the scheme OR ii) 15% of the average AUM (Year To Date) of the scheme, which ever is higher ✅
- B. When the new inflows from beyond top 25 cities is at least 30% of the gross new inflows
- C. When the new inflows from beyond top 30 cities is at least 10% of the gross new inflows
- D. When the new inflows from beyond top 15 cities is at least 20% of the gross new inflows
Answer: A — When the new inflows from beyond top 30 cities is at least i) 30% of the gross new inflows in the scheme OR ii) 15% of the average AUM (Year To Date) of the scheme, which ever is higher
Why: In addition to the regular limits, the following expenses may be charged to the scheme: i. Brokerage and transaction cost which are incurred for the purpose of execution of trade up to 0.12 percent of trade value in case of cash market transactions and 0.05 percent of trade value in case of derivatives transactions. ii. If the new inflows from beyond top 30 cities are at least a) 30 percent of gross new inflows in the scheme or b) 15 percent of the average assets under management (year to date) of the scheme, whichever is higher, funds can charge the additional expense of up to 0.30 percent of the daily net assets of the scheme.
💡 B-30 extra 0.30% TER if inflows >= 30% of gross OR 15% of avg AUM, WHICHEVER HIGHER.
2. Identify the CORRECT statement/s. A. Valuation gains are ignored. But valuation losses need to be adjusted against the profits while calculating distributable surplus. B. The Mark-to-market gains form a part of the distributable reserves in case of mutual fund Income Distribution Cum Capital Withdrawal plan
- A. Only A is correct ✅
- B. Only B is correct
- C. Both A and B are correct
- D. Both A and B are incorrect
Answer: A — Only A is correct
Why: SEBI guidelines stipulate dividends can be paid out of distributable reserves. Mark-to-market gains are on paper - they are not realised. They will be realized when those investments are sold. So these cannot be included in distributable reserves Also Valuation gains are ignored. But valuation losses need to be adjusted against the profits. This conservative approach to calculating distributable reserves ensures that dividend is paid out of real and realized profits, after providing for all possible losses.
💡 Distributable surplus: IGNORE valuation gains, but SUBTRACT valuation losses (conservative).
3. Opening of time stamping machine needs to be documented and reported to the Asset Management Company (AMC) - State whether True or False?
- A. True
- B. False ✅
Answer: B — False
Why: The points of acceptance for mutual fund transactions have time stamping machines with tamper-proof seal. Opening the machine for repairs or maintenance is permitted only by vendors or nominated persons of the mutual fund. Such opening of the machine has to be properly documented and reported to the Trustees .
💡 Opening a time-stamping machine is documented & reported to TRUSTEES (not AMC) -> False.
Practise all 93 NAV, TER & Pricing questions
Plus the full 743-question NISM V-A bank and real-feel mock exams.