n NISM Certifications
V-A NISM Series V-A
Medium

Identify the true statement with respect to measuring returns for Mutual Fund schemes. (A) Compounded Annual Growth Rate (CAGR) technique has been prescribed by SEBI when dividend is paid and compounding is to be considered (B) CAGR is the recognized standard for calculating returns for investment horizon of greater than or equal to 1 year (C) Simple Return can be calculated using the formula: Sale Price - Cost Price / Cost Price

Practice question from NISM Series V A - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Only A and B are correct

  2. B

    Only A and C are correct

  3. C

    Only B and C are correct

  4. All A, B, and C are correct

    Correct answer

Why this is the answer

CAGR is indeed prescribed by SEBI for situations where compounding is involved, especially when dividends are paid. CAGR is the standard for calculating returns for periods of 1 year or more. The formula for Simple Return is correctly provided as: \( \frac{\text{Sale Price} - \text{Cost Price}}{\text{Cost Price}} \).

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