Impact of duration on debt nav

debt funds: how accrual and duration impact the nav?

Level - INTERMEDIATE

Watch this video to know how accrual and duration impact the returns of a debt fund.

AUTHOR(S): Uma Shashikant

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Impact of Duration on debt NAV

 Watch this video to know how accrual and duration impact the returns of a debt fund.

1 2 3 4

    1.Accrual income of a debt fund refers to the



  • Interest income earned from its debt investment
  • Income earned from money market investments in its debt portfolio
  • Capital gains accrued from its debt investments
  • 2.The accrual income of a fund will rise when



  • Yield of the fund goes up
  • Modified duration of the fund rises
  • Policy interest rates decline
  • 3.The NAV of which of these funds is likely to fall the most with an increase an interest rates



  • A fund with a modified duration of 3
  • A fund with a modified duration of 2
  • A fund with a modified duration of 1
  • 4.For a fund with a modified duration of 3, an interest rate drop of 0.5% will result in



  • A rise in NAV of 1.5%
  • A rise in NAV of 3%
  • A rise in NAV of 6%
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