Multiple choice

A mutual fund launched a new scheme. It issued 10 crore units. The offer document mentioned entry load of 2.25% of face value during the New Fund Offer period. Issue expenses were Rs. 8 crores. How much of this is borne out of entry load?

  1. Rs. 2.25 Cr

  2. Rs. 6 Cr

  3. Rs. 8 Cr

  4. Rs. 3.75 Cr
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A Correct answer
Explanation

Entry load of 2.25% is charged on the face value (typically Rs. 10) during NFO. For 10 crore units: 10 crore × Rs. 10 (face value) = Rs. 100 crore total. Entry load = 2.25% of Rs. 100 crore = Rs. 2.25 crore. Issue expenses were Rs. 8 crore, but only Rs. 2.25 crore can be recovered from the entry load; the remainder must be borne by the AMC.

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