NISM Series 5A Chapter 4: NAV & Expense Ratio (TER) Calculation Questions & Cheat Sheet
Chapter 4 (Net Asset Value, Total Expense Ratio, and Pricing of Units) accounts for 12 to 14 marks in the NISM Series V-A exam. Master the exact formulas for NAV, SEBI TER slabs, cut-off timings, and exit loads with step-by-step solved numericals.
Quick Facts & Exam At-A-Glance
Overview & Context
In the NISM Series V-A: Mutual Fund Distributors examination, Chapter 4 is the single largest source of numerical and scenario-based questions. Because SEBI mandates strict transparency in scheme valuation, Total Expense Ratio (TER) ceilings, and uniform cut-off timings for NAV applicability, every distributor must know how daily unit pricing works.
2. SEBI Total Expense Ratio (TER) Slabs (Regulation 52)
SEBI caps the maximum Total Expense Ratio an Asset Management Company (AMC) can charge based on the scheme's daily net assets (AUM) slab. As AUM grows, the maximum permitted TER drops (economies of scale).
| Daily Net Assets (AUM Slab) | Equity-Oriented Schemes (Max TER) | Other Schemes / Debt (Max TER) |
|---|---|---|
| First ₹500 Crore | 2.25% | 2.00% |
| Next ₹250 Crore (₹500 Cr – ₹750 Cr) | 2.00% | 1.75% |
| Next ₹1,250 Crore (₹750 Cr – ₹2,000 Cr) | 1.75% | 1.50% |
| Next ₹3,000 Crore (₹2,000 Cr – ₹5,000 Cr) | 1.60% | 1.35% |
| Next ₹5,000 Crore (₹5,000 Cr – ₹10,000 Cr) | 1.50% | 1.25% |
| Next ₹40,000 Crore | 0.05% reduction per ₹5,000 Cr increase | 0.05% reduction per ₹5,000 Cr increase |
| Balance AUM above ₹50,000 Crore | 1.05% | 0.80% |
Additional Permissible Expenses:
- B-30 Cities Incentive: Up to 0.30% additional TER on daily net assets if new inflows from retail investors in Beyond Top-30 (B-30) cities meet SEBI thresholds (subject to SEBI regulatory reviews/pauses on B-30 accruals).
- Index Funds & ETFs: Maximum TER is capped at 1.00%.
- GST on Investment Management Fees: Charged over and above the base TER ceiling.
3. Exit Load, Repurchase Price & Cut-Off Timings
Since SEBI abolished entry loads in August 2009, the Sale Price equals the applicable NAV (after deducting 0.005% stamp duty from the invested capital). However, AMCs can levy an Exit Load upon redemption within a specified holding period.
Repurchase (Redemption) Price = Applicable NAV × (1 - Exit Load %)Uniform Cut-Off Timings (Fund Realization Rule):
Under SEBI's revised framework, NAV applicability depends on both application submission time AND actual realization of funds in the scheme's bank account (irrespective of investment amount):
| Scheme Category | Cut-Off Time | Condition for Same-Day / Previous-Day NAV |
|---|---|---|
| Liquid & Overnight Funds (Purchase) | 1:30 PM | If application + funds realized before 1:30 PM -> Previous day's closing NAV |
| Liquid & Overnight Funds (Redemption) | 3:00 PM | Up to 3:00 PM -> Same day's closing NAV (preceding calendar day if non-business day next) |
| Equity & Other Debt Funds (Purchase) | 3:00 PM | Same-day closing NAV only if funds are realized before 3:00 PM; else NAV of the day funds are credited |
| Equity & Other Debt Funds (Redemption) | 3:00 PM | Up to 3:00 PM -> Same day's closing NAV; after 3:00 PM -> Next business day's closing NAV |
Practice Test: NISM Series 5A Chapter 4
Test your comprehension right now with high-yield multiple-choice questions. Select an answer to see instant explanations.
A mutual fund scheme has investments valued at ₹450 crore, receivables of ₹12 crore, accrued income of ₹3 crore, and liabilities plus accrued expenses of ₹15 crore. If there are 15 crore outstanding units, what is the scheme's NAV?
An investor submits a redemption request for 1,000 units in an equity fund at 2:15 PM on a Tuesday. The applicable closing NAV is ₹80.00 and the scheme has an exit load of 1% for redemptions within 1 year. Assuming the investor held the units for 6 months, what is the net redemption amount?
An investor purchases units worth ₹1,00,000 in a mutual fund scheme where the applicable NAV is ₹50.00. Ignoring exit load, approximately how many units will be allotted after accounting for statutory stamp duty?
What is the maximum base Total Expense Ratio (TER) allowed by SEBI for an open-ended equity-oriented mutual fund scheme on the first ₹500 crore of daily net assets?
An investor submits a purchase application for ₹50,000 in an Equity Mutual Fund on Monday at 1:00 PM via cheque. The funds are realized in the AMC's bank account on Wednesday at 11:00 AM. Which day's closing NAV will apply?
Which of the following statements is TRUE regarding Mutual Fund Total Expense Ratio (TER) and NAV?
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