Mutual Fund: - Mutual is a trust that pools the savings of a number of

investors who share a common financial goals. Mutual Fund offers an

opportunity to invest in a diversified professionally managed basket of
securities at relatively low cost.

Explain Briefly the NAV of a Mutual Fund scheme.

Answer: NAV is the value of the fund’s assets minus its liabilities. SEBI rules
require funds to calculate the NAV daily. To calculate the NAV per share,
simply subtract the fund’s liabilities from its assets and then divide the result
by the number of shares outstanding.
If the market value of a fund’s portfolio increases, after deduction of expenses
and liabilities, then the value (NAV) of the fund and its shares increases. The
higher NAV reflects the higher value of your investment.
NAV of a Mutual Fund are published on a daily basis in the newspapers and
electronic media and play an important role in investor’s decision to enter or
to exit. Analyst use the NAV to determine the yield on the schemes.

Particulars Amount
Market value of the Investment XXXX
+ Receivables XXX
+Other Accrued Income XXX
+ Other Assets XXX
- Accrued Expenses (XXX)
-Other Payables (XXX)
-Other Liabilities (XXX)
Net assets of the scheme XXXX

Net Assets Value (NAV): -

Net Assets Value (NAV) = Total Assets – Outside Liability

Or

Net Assets Value (NAV) = Market Value of Investment + Receivables +

Accrued Income + Cash & Cash Equivalent + Other Assets – Accrued
Expenses – Payable – Other Liabilities

NAV per Unit = Total NAV/No. of Units Outstanding

Note: - For Calculation of Net Assets Market Value should be taken unless
not provided or stated in question to take otherwise.

Load on Mutual Fund

A) Entry Load: - Entry Load is levied on purchase of Mutual Fund.

If there is entry load then NAV will be :

NAV = NAV + Entry Load

B) Exit Load: - Exit Load is levied on sale/exists of Mutual Fund.

If there is exist load the NAV will be –

NAV = NAV – Exit Load

Expenses Ratio = (Expenses x 100) /(NAV1 + NAV0)/2

Where, NAV1 = NAV at Year End

NAV0 = NAV at beginning of Year

Return = [(Dividend + Capital Gain + NAV1 – NAV0) x 100]/NAV0

Where,

Dividend and Capital Gain Consist which are distributed to unit holders

Dividend should be calculated on face value if dividend rate is given unless

otherwise stated in question or dividend yield is given.

Distinguish Between Open Ended and Close Ended Funds.

Answer:
PARAMETER OPEN ENDED FUNDS CLOSE ENDED FUNDS
Fund Size Flexible Fixed
Liquidity provider Fund itself Stock market
Significant premium/discount to
Sale Price At NAV plus load, if any
NAV
Availability Fund itself Through exchange where listed
Intra-Day Trading Not possible Expensive
NAV Daily Daily
Portfolio Disclosure Monthly Monthly