Mutual fund units and a disclosed exit load
Series X-A case study · set 1, case 6 of 9 · 5 questions · 1 mark each
Question 1 of 5Case practice
0 right · 0 wrong · 5 to go
The case · stays here for all 5 questions
Nisha invests ₹1,00,000 in a fictional mutual fund at a NAV of ₹25, with no entry charge or other deduction. One year later, immediately before redemption, the NAV is ₹27 and no cash distribution has occurred. The exercise’s contract applies an exit load equal to 1% of gross redemption value on this transaction. Treat that load as a stated hypothetical term, not a claim about any current scheme. Nisha redeems all units. For comparison, a second option would have grown her money to ₹1,07,000 after all charges over the same year. There are no taxes or timing differences.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
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The case and its answers
Every question of this case, with its answer and why each other option is wrong.
Nisha invests ₹1,00,000 in a fictional mutual fund at a NAV of ₹25, with no entry charge or other deduction. One year later, immediately before redemption, the NAV is ₹27 and no cash distribution has occurred. The exercise’s contract applies an exit load equal to 1% of gross redemption value on this transaction. Treat that load as a stated hypothetical term, not a claim about any current scheme. Nisha redeems all units. For comparison, a second option would have grown her money to ₹1,07,000 after all charges over the same year. There are no taxes or timing differences.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
Q1How many units does Nisha purchase?
Option A. 2,500 units
Why it is wrong: This multiplies unrelated digits rather than dividing the investment by NAV.
Option B. 4,040 units
Why it is wrong: There is no entry bonus in the case.
Option C. 4,000 units — Correct answer
Option D. 3,703.70 units
Why it is wrong: This uses the later NAV.
Answer: C. ₹1,00,000 ÷ ₹25 = 4,000 units. Remember: Units are investment value divided by the applicable NAV.
Hint, shown before you answer in practice mode: Divide the invested amount by purchase NAV.
XA-S1-C06-Q1easynumerical
Q2What is the gross redemption value before the stated load?
Option A. ₹1,06,920
Why it is wrong: This is the net value after the load.
Option B. ₹1,07,000
Why it is wrong: This is the value of the comparison option.
Option C. ₹1,08,000 — Correct answer
Option D. ₹1,00,000
Why it is wrong: This ignores NAV growth.
Answer: C. 4,000 × ₹27 = ₹1,08,000. Remember: Gross redemption value is calculated before applicable deductions.
Hint, shown before you answer in practice mode: Multiply units by redemption NAV.
XA-S1-C06-Q2mediumnumerical
Q3What net amount is paid after the 1% load?
Option A. ₹1,08,000
Why it is wrong: This ignores the load.
Option B. ₹1,09,080
Why it is wrong: This adds the load rather than deducting it.
Option C. ₹1,06,920 — Correct answer
Option D. ₹1,07,000
Why it is wrong: This deducts 1% of original investment instead of gross redemption value.
Answer: C. Load = ₹1,08,000 × 1% = ₹1,080. Net proceeds = ₹1,08,000 − ₹1,080 = ₹1,06,920. Remember: Read a charge’s calculation base before applying its rate.
Hint, shown before you answer in practice mode: The load base is specified as gross redemption value.
XA-S1-C06-Q3mediumnumerical
Q4What is the one-year return after the load?
Option A. 8.00%
Why it is wrong: This is the return before the load.
Option B. 7.00%
Why it is wrong: This is the comparison option’s net return.
Option C. 1.00%
Why it is wrong: This is only the load rate.
Option D. 6.92% — Correct answer
Answer: D. (₹1,06,920 ÷ ₹1,00,000 − 1) × 100 = 6.92%. Remember: Net investor return includes charges paid by the investor.
Hint, shown before you answer in practice mode: Compare net proceeds with the original ₹1,00,000.
XA-S1-C06-Q4mediumnumerical
Q5Which option has the higher final amount on the assumptions supplied?
Option A. The mutual fund, by ₹80
Why it is wrong: This reverses the sign of the difference.
Option B. The mutual fund, by ₹1,000
Why it is wrong: This compares gross fund value with net comparison value.
Option C. Both are equal
Why it is wrong: ₹1,07,000 and ₹1,06,920 differ.
Option D. The comparison option, by ₹80 — Correct answer
Answer: D. ₹1,07,000 − ₹1,06,920 = ₹80 in favour of the comparison option. This is only a final-value comparison, not a complete risk comparison. Remember: Compare like-for-like net outcomes while separately assessing risk.
Hint, shown before you answer in practice mode: Compare both options after all stated charges.
XA-S1-C06-Q5mediumnumerical
Rebalancing a portfolio with a cash withdrawal
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