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Ch.10 · Risk Measures and Ratios · easy

What is 'NAV-based return' calculation for a lump sum investment?

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EXPLANATION

For a lump sum investment, absolute return = (Redemption NAV - Purchase NAV) / Purchase NAV × 100. For example, if you bought at NAV ₹20 and redeemed at NAV ₹28, absolute return = (28-20)/20 × 100 = 40%. For periods over 1 year, this is then converted to CAGR.

A.(Redemption NAV - Purchase NAV) / Redemption NAV × 100

B.(Redemption NAV - Purchase NAV) / Purchase NAV × 100 [✓ Correct]

C.(Purchase NAV - Redemption NAV) / Purchase NAV × 100

D.Redemption NAV / Purchase NAV × 100

EXPLANATION

For a lump sum investment, absolute return = (Redemption NAV - Purchase NAV) / Purchase NAV × 100. For example, if you bought at NAV ₹20 and redeemed at NAV ₹28, absolute return = (28-20)/20 × 100 = 40%. For periods over 1 year, this is then converted to CAGR.

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