The registrar reconciles a folio after purchase and redemption

The case and its answers

Every question of this case, with its answer and why each other option is wrong.

A mutual fund folio starts with 1,000 units. A valid additional purchase of ₹10,000 is allotted at an applicable NAV of ₹25, with no deduction from the purchase amount. Later the investor redeems 200 units at an applicable NAV of ₹30. The stated fictional scheme terms apply an exit load of 0.5% of the gross redemption value. The exit load reduces the cash paid but does not change the 200 units cancelled. After both transactions, the remaining units are valued at ₹30. No other transactions, taxes or charges occur. The registrar must keep the unit ledger and cash-payment calculation consistent.

Applicable NAVs and valid processing are stipulated. No cut-off-time rule is tested.

The exit load is a hypothetical scheme term.

1. Q1How many units are in the folio immediately after the additional purchase?

   • A

     Option A. 1,400 units — Correct answer

   • B

     Option B. 1,200 units

     Why it is wrong: This already subtracts the later redemption.

   • C

     Option C. 1,333.33 units

     Why it is wrong: This uses the later NAV of ₹30 for the purchase.

   • D

     Option D. 400 units

     Why it is wrong: This omits the opening 1,000 units.

   Answer: A. The purchase creates 400 units, so the folio holds 1,000 + 400 = 1,400 units. Remember: A unit ledger adds new allotments to the opening balance.

   Hint, shown before you answer in practice mode: Add ₹10,000 divided by ₹25 to the opening balance.

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2. Q2How much redemption cash is paid after the stated exit load?

   • A

     Option A. ₹4,975

     Why it is wrong: This uses the purchase NAV of ₹25 rather than the redemption NAV.

   • B

     Option B. ₹5,700

     Why it is wrong: This uses 5% rather than 0.5%.

   • C

     Option C. ₹6,000

     Why it is wrong: This ignores the 0.5% load.

   • D

     Option D. ₹5,970 — Correct answer

   Answer: D. Gross redemption is 200 × ₹30 = ₹6,000. The load is ₹30, leaving ₹5,970 payable. Remember: Use the correct transaction NAV and charge percentage.

   Hint, shown before you answer in practice mode: Calculate the ₹6,000 gross redemption, then apply 0.5%.

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3. Q3What is the unit balance after both transactions?

   • A

     Option A. 800 units

     Why it is wrong: This omits the additional purchase.

   • B

     Option B. 1,400 units

     Why it is wrong: This omits the redemption.

   • C

     Option C. 1,201 units

     Why it is wrong: This treats the ₹30 exit load as if one fewer unit were cancelled.

   • D

     Option D. 1,200 units — Correct answer

   Answer: D. Closing units = 1,000 + 400 − 200 = 1,200. The load affects cash, not the stated cancellation quantity. Remember: Reconcile unit quantities separately from cash deductions.

   Hint, shown before you answer in practice mode: Deduct the full 200 redeemed units regardless of the cash load.

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4. Q4What is the market value of the remaining units at the stated observation NAV?

   • A

     Option A. ₹30,000

     Why it is wrong: This values only the original 1,000 units.

   • B

     Option B. ₹36,000 — Correct answer

   • C

     Option C. ₹35,970

     Why it is wrong: This subtracts the exit load again from the remaining investment.

   • D

     Option D. ₹42,000

     Why it is wrong: This values the units before redemption.

   Answer: B. Remaining value = 1,200 × ₹30 = ₹36,000. The exit load has already been deducted from the redemption cash and is not deducted again. Remember: Avoid counting the same charge twice.

   Hint, shown before you answer in practice mode: Multiply the closing units by ₹30.

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