Here are the questions which have been asked by readers as queries. I don’t own any of the question.
1.Chintan borrows from Bharat a sum of Rs 50,000 at the end of 3 years from now and another Rs. 80000 at the end of 5 years from now. What cash amount should be accepted now in lieu of the above 2 payments if interest rate is 5% per annum?
- (a) Rs 112842
- (b) Rs 115900
- (c) Rs 118219
- (d) Rs 105874
2. While making an investment in a Debt fund for your client you make the following remarks:
(A) Rate of return by the instrument in past is 8.5% and is expected to continue in future
(B) Investment would have low risk
Which of the statement is voilative with respect to CFP Code of Ethics?
- (a) (A) Only
- (b) (B)Only
- (c) Both (A) and (B)
- (d) None of the above
3. Sundar, 40 years young, spends Rs. 100000 pa to maintain his family. He expects his standard of living to grow 3% over and above inflation each year. He would be retiring at age of 60 years. After retirement he expects his expenditure to be 90% of his last years expense What would be his expenditure in the first year after retirement Assume inflation rate is 6%
- (a) Rs 490537
- (b) Rs 650441
- (c) Rs 560441
- (d) Rs 504397
4. Kumar, aged 30, is interested in planning for retirement. He saves Rs. 10000 per year (at the yearend) in a bank fixed deposit earning 8% p.a. compounded annually until he retires at age 60. His life expectancy is 80 years. What will be his corpus on the date of retirement? What is the fixed annual amount he can withdraw at the beginning of each year until age 80 presuming that he wishes to leave his heirs an estate of Rs 200000 then? Assume that all post retirement funds are invested in the same instrument. Inflation rate is constant at 6% p.a.
- (a) Rs. 1132832. Rs. 102787
- (b) Rs. 1105694. Rs. 61375
- (c) Rs. 1054875. Rs. 108423
- (d) Rs. 1132832.Rs. 59040
Solution:
STEP-1
- PMT = 10000
- N = 30
- I/Y = 8
- FV = (?) = 1132832
STEP-2
- PV = 1132832
- FV = 200000
- N = 20
- I/Y = 8
- PMT(BGN) = ? = 102787
5. Neha has received an inheritance of Rs. 2.5 lakh. She wants to withdraw equal amounts at the beginning of each month for the next seven years. She expects to earn an annual interest of 10% compounded monthly on her investments. What amount can she receive each month?
- (a) Rs.4150
- (b) Rs.4116
- (c) Rs. 2266
- (d) Rs. 2626
6. Nilesh, 30 years old, is currently earning an annual emolument of Rs. 300000. He starts saving 10% of his salary at every year end in a recurring plan which yields a rate of interest equal to 6% p.a. His salary increases by 5% p.a. How much will he be able to accumulate at the age of 60?
- (a) Rs.4520530.
- (b) Rs.4965080.
- (c) Rs.3519820.
- (d) Rs. 4264650.
7. Parva is an NRI who has been working in the Gulf for the past 10 years. He is aged 30. He has been saving Rs. 10 lakh per annum for the past 10 years and hopes to save the same amount for the next 10 years that he plans to live in the Gulf. The inflation-adjusted monthly income requirement for Pavan is Rs. 100000 in the year in which he returns to India. It is estimated that inflation would remain at an average of 3% during Pavan’s retired life of 30 years. Pavan’s life expectancy is placed at 70 years. If his investments earn a target return of 6%. What is the accumulated nest egg required for his retirement?
Assumption; compounding to be done on annuity certain basis, throughout the problem. Select closest answer.
-
(a) Rs.233Lakh
- (b) Rs.146Lakh
- (c) Rs.116Lakh
- (d) Rs.240Lakh
8. Diversification reduces the risk of an entire portfolio if
- (a) the asset classes chosen are more than 4
- (b) the assets are mainly consisting of Real Estate
- (c) the asset classes chosen have a low correlation
- (d) the assets mainly consists of Government securities
9. Sources of income to be considered at the time of retirement are.
- (a) Portfolio Income
- (b) Passive income
- (c) Earned Income
- (d) All of the above
10. Living Standards in India will rise if
- (a) population and GDP equally grow
- (b) population grows faster than GDP
- (c) relationship between GDP growth and population has no effect
- (d) GDP grows faster than the population.
11. Harinder has heard that changes in inflation rate might have a significant impact on his real saving. Currently he would buy the car of his dreams for Rs. 3 Lakh. He wants to estimate the amount he may need to buy the car in 8 yrs time. The inflation rate for the period are expected to be 5% for first four year, 4 % for next four year value of the car is expected to fall by 10 % every time over a period of 4 yrs. If he buys the car in 8 yrs then what would be the same real amount that he would need to have saved.
- a) 345539
- b) 400000
- c) 383932
- d) 426591
12. Sundar is a 30 year-old self employed youth with a life expectancy of 75 years. He has been saving Rs. 30,000 per year providing a compounded return of 8% p.a. for last 5 years. Swamesh wants to retire after total 25 years of saving. His post retirement funds are expected to earn 6% pa returns and expenses after retirement are fixed at Rs. 3 lakh per year. He wants to know what rate of return should he get on his current accumulated fund as well as his future yearly saving of Rs. 30,000 pa till retirement. To fund his retirement needs and leaving Nil estate behind. (Assumption: All computations for interest spend and savings compound annually, assuming beginning of the period investment).
- (a) 11.72%
- (b) 11.69%
- (c) 10.61%
- (d) 13.20%
PVS (Prashant V Shah) 