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Mutual fund- illustration 21
AFM
Here dividends are reinvested. Means dividends are not received by investors, rather number of units increases So the total return of 1.15 lak is due to higher closing NAV right? why are we here reducing dividends, which is not actually received by the investor?
Answers (10)
Thread Starter
nazriya nasarAbsolute return= closing nav-opening nav+divided +cap gain received So in this formula we have to consider the dividend 'earned'? Instead of looking whether it is actually received or reinvested?
Yes, the amount of dividend has to be reduced as we are doing backward working. So earlier dividend is added to calculate Annualised yield, now in order to calculated closing NAV we have to subtract that.
The dividend is reduced because we have to find out reinvested units. If the total return is 115000 and it includes a dividend that is reinvested, how will you find out the unit count that has increased, unless you separate the total return into an increase in NAV 105000 and new units 10000/ NAV.
Thread Starter
nazriya nasarAbsolute return= closing nav-opening nav+divided +cap gain received So in this formula we have to consider the dividend 'earned'? Instead of looking whether it is actually received or reinvested?
Here dividend is paid to unit holders, this is not the dividend received by the MF company from its holdings. only in that case, you will have issues of received declared etc. we have explained those cases in NAV computation problems available in the later part of the chapter
Sriram Somayajula Admin
The dividend is reduced because we have to find out reinvested units. If the total return is 115000 and it includes a dividend that is reinvested, how will you find out the unit count that has increased, unless you separate the total return into an increase in NAV 105000 and new units 10000/ NAV.
Sir i did my working like this... Can u guide me what is conceptually wrong here
Thread Starter
nazriya nasarSir i did my working like this... Can u guide me what is conceptually wrong here
And calculated declared like this
Thread Starter
nazriya nasarCalculated *units reinvested
Now based on this 465.12 please compute the return over 9 month period based on Original investment and final closing value and let me know if it works to 153.33%?
Sriram Somayajula Admin
Now based on this 465.12 please compute the return over 9 month period based on Original investment and final closing value and let me know if it works to 153.33%?
Didn't get u actually... Did u mean like this sir?
Thread Starter
nazriya nasarDidn't get u actually... Did u mean like this sir?
No. What i meant was (closing units x closing NAV - opening units x opening NAV )/ (opening units x opening NAV) - this will not give you 153.33%
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