Mohan had a fixed deposit of 5 lakhs in a Nationalised Bank,
which fetched him 7% p.a. interest. He decided to park his funds in
a mutual fund scheme (NAV 100) with no entry load but 2.5% exit
load, if one exits the scheme before completion of 5 years. The
scheme declared dividend of 8%, 7%, 10% and 5% for first four
years. Mohan redeemed all units at the end of 4 years. When NAV
was 90. Was his decision to shift to mutual fund beneficial ?
Answers
Given : a fixed deposit of 5 lakhs in a Nationalised Bank, which fetched him 7% p.a. interest.
a mutual fund scheme (NAV 100) with no entry load but 2.5% exit load, if one exits the scheme before completion of 5 years. The scheme declared dividend of 8%, 7%, 10% and 5% for first four years. Mohan redeemed all units at the end of 4 years. When NAV was 90
To Find : decision to shift to mutual fund beneficial or not
Solution:
P = 500000
R = 7 %
T = 4 years
A using SI = 500000 + 500000 * 7 * 4 /100 = 640000
dividend of 8%, 7%, 10% and 5% for first four years.
Total Dividend = 25 % = (25/100)*500000 = 125000
NAV 90 hence amount = (90/100)500000 = 450000
2.5 % exit load hence net = (97.5/100)*450000 = 438750
Total Amount = 125000 + 438750 = 5,63,750
5,63,750 < 640000
not a beneficial decision
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Answer:
this is the answer and remember exit load is calculated on selling nav
