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

The NFO price of a mutual fund scheme was Rs. 10 and its current Net Asset Value (NAV) is Rs. 8. What would happen if the transactions were to happen at NFO price?

Practice question from Nism VA Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    The new investors as well as the existing investors in this scheme would stand to lose

  2. B

    The new investors as well as the existing investors in this scheme would stand to gain

  3. C

    The new investors stand to gain at the cost of existing investors

  4. The new investors stand to lose at the cost of existing investors

    Correct answer

Why this is the answer

If new investors purchase units at Rs. 10 when the NAV is Rs. 8, they are paying a higher price, thus incurring a loss. Existing investors benefit because they can sell at the higher price, Rs. 10.

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Nism VA Mock Test 6