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Ch.2 · Advantages and Limitations of Mutual Funds · easy

An investor invests ₹10,000 in a mutual fund scheme at a NAV of ₹50. How many units will be allotted?

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EXPLANATION

Units allotted = Investment Amount ÷ NAV = ₹10,000 ÷ ₹50 = 200 units. This is the basic unit allotment formula. In practice, entry load no longer applies (banned), so the full investment amount is used to compute units at the applicable NAV.

A.100 units

B.200 units [✓ Correct]

C.500 units

D.1,000 units

EXPLANATION

Units allotted = Investment Amount ÷ NAV = ₹10,000 ÷ ₹50 = 200 units. This is the basic unit allotment formula. In practice, entry load no longer applies (banned), so the full investment amount is used to compute units at the applicable NAV.

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