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Questions for Investment Planning, CFP

Posted by Prashant Shah on July 31, 2013

Following questions have been suggested by one of the reader. Hence I don’t own any of the question.

1. Mr. A is of 35 yrs with spouse and a kid of an age 5 yrs. His strategic asset allocation is 50:35:15 in equity, debt and liquid. He is able to invest rs 1.5lakh pa immediately to work various life goal. At age 40 the allocation would change to 40:50:10 in equity, debt and liquid asset with annual investment going up to 2.5 lakh for 5 more years. At age 45, for next 10 year he adapts the conservative wealth protection allocation 25:70:5 in eq, debt & liquid asset with 3 lakh pa investments. The per annum return expected in this stage are; from equity : 12%.11% & 10%, from debt : 9%,8% & 7%, from liquid asset : 6,5%,5.5% & 4.5%.What amount could he accumulate by his age 55 years?
a. 113.9 lakhs
b. 97.21 lakhs
c. 66.65 lakhs
d. 117.91 lakhs

SOLUTION:

150000

FV

FV

FV

E

75000

12

$533,639.18

$899,213.05

$2,332,327.07

D

52500

9

$342,475.06

$503,208.23

$989,886.75

L

22500

6.5

$136,433.87

$178,313.61

$276,915.59

$3,599,129.41

250000

FV

FV

E

100000

11

$691,285.96

$1,793,017.74

D

125000

8

$791,991.13

$1,557,966.43

L

25000

5.5

$147,201.28

$228,599.08

$3,579,583.24

300000

FV

E

75000

10

$1,314,837.53

D

210000

7

$3,104,555.86

L

15000

4.5

$192,617.68

$4,612,011.07

$11,790,723.72

2. Your client wants to buy a house in 3 years in an area where the current price are 60 lakhs appreciating at 8% pa. He can afford loan up to Rs 40 lakh. He has an FD of Rs 8 lakh which are maturing shortly. You find that reinvesting in FD would not fetch good return. You advice to shift the entire FD maturity to long run debt scheme, expected to return 12% pa for next 2 years. He can additionally invest rs 30000 pm for the goal which you advice to invest in equity which you expect to return 15% pa in the next 2 years. You shift the debt & equity accumulation to liquid fund returning 5% pa in the third year while additionally investing in that fund. You estimate achievement of own fund for house to be?
a. The difference between own fund required and available may swell over 16 lakh
b. Shortfall of 12.58 lakh in own fund after 3 yrs
c. Achieve the goal with surplus of 3 lakh
d. Shortfall of 6 lakh

SOLUTION: Solve this question using monthly nominal rate to get the exact answer.

CV

6000000

FD

800000

EQ

$844,063.05

3 Y VALUE

7558272

FV

1003520

LOAN

4000000

TOTAL

$1,847,583.05

DP REQUIRED

3558272

INVESTMENT VALUE WITH ADDITIONAL INVESTMENT

$23,10,475

 SHORT

$12.48 L

3. Mr. A has gross annual salary of 9 lakh of which he saves 30% which include statutory EPF deduction, PPF and monthly systematic investment in long term MF scheme. Another 30% goes toward servicing of household & car loan & taxes. His financial planner advice him to accumulate 6 months household expense in liquid fund. HE change job and expect immediate rise of 20% in his gross income .You estimate that other heads would not change materially except his household expense which would rise by 5% due child education. How many months will it take to accumulate liquid reserve?
a. 25 months
b. 11 months
c. 14 months
d. 13 months

SOLUTION:

900000

INCOME

1080000

270000

EPF

270000

270000

LOAN

270000

360000

HOUSEHOLD

378000

SAVINGS

162000

REQUIREMENT

189000

SAVINGS PA

162000

MONTHS

=189000/162000=1.16667*12 = 14

4. An individual start investing immediately for 10 year annually Rs 80000 in the ratio 70:30 in equity and debt products. He expects the return from equity and debt to be 12.5% pa & 9.5% pa. during this period. To protect the wealth he rebalance the portfolio in 40:60 of equity and debt after 10 yrs and invest in same ratio annually rs 1.5 lakh for next 10 years. The return expected from equity and debt in this period subsides to 10.5% pa and 7.5% pa respectively. What could be his total investment at the end of the entire tenure of his investment?
a. 60.38 lakh
b. 60.31 lakh
c. 70.42 lakh
d. 61.58 lakh

5. A bond with par value of rs 1000 and coupon rate of 11% (payable semi-annually, next coupon due immediately) and maturing after 5 years is available at Rs.942.50 in the market. If the coupon received can be reinvested till maturity at average rate of 8.5% pa. What could be realized rate of return from such investment if the bond is held till maturity?
a. 13.33%
b. 13.15%
c. 13.90%
d. 13.60%

SOLUTION:

  C FV AT NOM RATE OF 8.5%
1 55 82.6984719
2 55 79.39332767
3 55 76.22027752
4 55 73.17404214
5 55 70.24955324
6 55 67.44194507
7 55 64.74654634
8 55 62.15887248
9 55 59.67461813
10 55 57.28965
11 55 55
    748.0473045
    1000
  TOTAL 1748.047304
  RY 13.150%

PV = 942.5, FV = 1178.04, N = 5, I/Y =?

6. An investor purchased 5000 units of an equity oriented MF scheme under dividend reinvestment scheme on 1st June 2012 at NAV of rs 18.46 along with systematic investment plan of rs 5000, each for 6 months. The SIP dates are 1st of every month beginning 1st July 2012. The NAV at which additional unit were bought through SIP were rs 19.06, rs 18.51, rs 17.23, rs 18.97, rs 16.75 and rs 17.95 on 15 October 2012. The scheme declared a dividend of 25% on face value of rs 10 per unit which record date being 21st October 2012. The NAV on 22nd October 2012 was rs 16.50. The investor redeemed all units on 28 January 2013 at a price of rs 19.10 . What holding period return was obtained by investor?
a. 27.83%
b. 23.58%
c. 15.89%
d. 18.46%

Solution:

    DATE          AMT              NAV           UNITS
1-Jun-12 92300 18.46 5000
1-Jul-12 5000 19.06 262.3294858
1-Aug-12 5000 18.51 270.1242572
1-Sep-12 5000 17.23 290.1915264
1-Oct-12 5000 18.97 263.5740643
22-Oct-12 15215.55 16.5 922.1544445
1-Nov-12 5000 16.75 298.5074627
1-Dec-12 5000 17.95 278.551532
28-Jan-13 -144882 19.1 7585.432773
122300 Total investment
18.46%

Final step: (144882-122300)/122300 = 18.46%

7. Mr. B bought the house by availing a housing loan of rs 25 lakh for 15 yrs at a variable rate of interest. The initial rate was 8.5% & the fixed EMI was in May 2008. The finance company raise the rate to 9.25% pa effective from EMI due on April 2009. The finance company retain the same EMI but increased the outstanding tenure. Mr. B received a bonus of rs 2.5 lakh from her employer in May 2010. What amount she should prepare to invest to bring back tenure to original contract period with effect from June 2010?
a. 75,814
b. 111,215
c. 78,681
d. 109,543

SOLUTION:PV=2500000N=180

I/Y = 8.5/12

PMT = 24618

P1=1, P2=11

BAL = 2421238

PMT = 24618

I/Y = 9.25/12

N = ? 184.8

P1=1, P2=14

BAL = 2333570

PMT = 24618

N = 180-25 = 155

I/Y = 9.25/12

PV = 2222303

HENCE PREPAYMENT REQUIRED   = 2333570-2222303 = 111267 APPROX

8. You purchase 500 shares of a company at rs 205 per share on 1st July 2011. The dividend of rs 1100 and rs 1300 were received respectively in August 2011 and September 2012. On 1st January 2013 the share were sold for rs 1.15 lakh. Your holding period return comes to?

9. An investor allocated equal amount of rs 2 lakh each to bond, stock and gold ETF three years ago. His investment in bond has yielded coupon of rs 7500 every six months & is presently redeemable at rs 2.13 lakh. The stock portfolio is valued at rs 2.79 lakh. He has also received rs 2725 as dividend from stock in year one, rs 3125 in year two and rs 2965 lately. The gold ETF unit have a market value of rs 2.58 lakh. The coupon and dividend received remain in the bank saving account yielding an annual interest of 4.5%. If the inflation remained at 10.5%, 9.6% and 8.5% in those three year. What real rate of return he stands to generate on liquidation of entire portfolio?
a. 1.02% pa
b. 0.77% pa
c. 0.88% pa
d. 0.71% pa

10. A invested 1o lakh in beginning of year in equity, corporate bond, government sec and alternate investment in proportion 35:35:20:10. A year after making investment it generated  return which were 14%,10%,6%,16% respectively. If investor followed constant mix policy his plan of action would be?
a. Keep the portfolio under changed
b. Buy equity of rs 9800 and alternate investment of rs 4800 and sell corporate bond of rs 4200 and government sec of rs 10,400.
c. Increase the exposure of alternate investment and equity
d. Sell equity of rs 9800 and alternate investment of rs 4800 and buy corporate bond of rs 4200 and government sec of rs 10,400.

11. XYZ company paid dividend 2, recently of common stock; dividend expected to grow by 20% for next 3 years, after which expect to stabilize at 10% growth. If required rate of return is 15%. How much maximum price would you pay today to buy stock?
a. 82.5
b. 43.5
c. 52
d. 50

105 Responses to “Questions for Investment Planning, CFP”

  1. Dear Prashant sir,

    Today I cleared investment planning with B. The only regret is that I scored 112 (74.67%) marks and to score A we are required to score 112.5(113). I found many question from this article and it was useful to solve all the questions and get the ideas and understanding the strategies to solve all the question in time.

    I would like to thanks Prashant sir, Manish sir, and Prathmesh

    • rupa said

      Hi Jasbir Singh,

      please share which type of questions you got in exam.How much weightage was given to derivatives?

  2. Dear Rupa,

    I got almost 4 sums from the above given questions and then I got many question with same strategy moreover I also found that TVM question from almost all Module sample papers of FPSB and many new sums were asked. The only thing that helped me to complete my paper just before the time was 1 marker and 2 marker theoretical and practical questions as because of its simplicity, I was able to do those question quickly. Paper was not at all easy bcoz while doing sums, I just concentrated on not doing silly mistakes and to execute the answer as quickly as possible because of shortage of time.

    • I got 1 question of Derivative for 2 marks, the question was

      the following statement is true ( or correct) for the buyer of call option

      the answer was he pays premium and is purchaser of contract

      I dont know if i got any other question of derivative, even I took so much time to understand the derivatives but not much was asked. but i would say it is worth understanding derivatives.

      • rupa said

        Dear jasbir,
        Thanks a lot for valuable inputs.
        Whats your suggestion for prepration for theory questions and over all strategy for exam?

      • Concentrate more on TVM and strategy to solve the sums of asset allocation. for 1 marker and 2 marker question mandars practice book was useful no matter it is old. thats it.

  3. vinay said

    Prashant sir, Thank you verymuch for the questions. I am preparing for IP exam. It would have been of much help if answers were also marked. I tried to solve question 1 and answer came as 113.19 lakhs. Nearest option is a. Pls anybody confirm it.

  4. Abuzaid Farooqui said

    Dear Prashant Sir.
    can you post the correct answers of your given IP questions.

  5. vinay said

    I cleared my IP exam yesterday with grade C. Many of the questions similar to the ones posted here appeared in the exam. Only problem was shortage of time. Expertise in using open-office and some short cut methods(in open office) to solve the questions were needed.

    Thanks a lot to Prashant sir and all the boarders here.

  6. Koustubh said

    11. XYZ company paid dividend 2, recently of common stock; dividend expected to grow by 20% for next 3 years, after which expect to stabilize at 10% growth. If required rate of return is 15%. How much maximum price would you pay today to buy stock?
    a. 82.5
    b. 43.5
    c. 52
    d. 50

    I solved it i am getting ans at 56.53 . please help

  7. Anuja said

    An investor allocated equal amount of rs 2 lakh each to bond, stock and gold ETF three years ago. His investment in bond has yielded coupon of rs 7500 every six months & is presently redeemable at rs 2.13 lakh. The stock portfolio is valued at rs 2.79 lakh. He has also received rs 2725 as dividend from stock in year one, rs 3125 in year two and rs 2965 lately. The gold ETF unit have a market value of rs 2.58 lakh. The coupon and dividend received remain in the bank saving account yielding an annual interest of 4.5%. If the inflation remained at 10.5%, 9.6% and 8.5% in those three year. What real rate of return he stands to generate on liquidation of entire portfolio?
    a. 1.02% pa
    b. 0.77% pa
    c. 0.88% pa
    d. 0.71% pa

    please help me in solving this question

    solution from my side

    my total FV is 809997 (considering reinvestment of coupons and dividends PLUS current MV of 3 assets)

    so return 1 is 10.52%

    and return 2 ( considering inflation ) is 9.53%

    my ans comes to ~ 0.5% which does not match with any of the optionst

    pls guide me about the methodology atleast..

    thanks

    • Dear anuja,

      The inflation rate which you have found is correct, but there is some twist while calculting IRR of investment
      200000 rs each in Bond, equity and ETF and the Future value at the end of 3 years is 213000+279000+258000=750,000

      Now dividend and coupons part

      dividends

      1st 2725*(1.045^2) as this will be recieved at the end of 1st year and will be invested in bank yielding 4.5% pa till end of 3rd yr
      2nd 3125*1.045 as this will be received at the end of 2nd year and will be invested in bank for 1 year only
      3rd 2925 no interest as this will be received at the end 3rd year

      we get 2975.77+3265.625+2925= 9166.395

      coupons

      pmt= -7500
      rate= 2.2252415 ( half yearly nominal rate)
      n=6
      fv=? 47578.9228

      now adding all Future values we get 750,000+47578.92+9166.395= 806745.315

      Now
      PV= -600000
      n=3
      fv=806745.315
      rate=? 10.37271

      real rate= ((1.10372/1.0953)-1)*100= 0.7687

      Regards

      Jasbir singh

    • vinay said

      My take-

      Total amount invested = 600000
      portfolio value redeemed = 213000 +279000+ 258000 = 750000
      coupon received from bonds lying in SB @ 4.5%- =FV(0.045/2;6;-7500;0;0) = 47608.
      Dividend received in first year rs 2725(assuming at the end of the year)lying at SB – 2976
      Dividend received in second year rs 3125(assuming at the end of the year)lying at SB – 3266
      Dividend received lately- 2965
      Total amount = 750000+47608+2976+3266+2965 = 806815
      Return = =RATE(3;0;-600000;806815;1) = 10.38%
      Average inflation = (10.5+9.6+8.5)/3 = 9.53%
      Real rate of return= (1.1038/1.0953)-1 = 0.776%

      So, answer b. Please wait for the confirmation from experts.

  8. jyoti1752 said

    sir ,would u pls forward me solution of Q.2 and Q.8, actully i solved Q.8 n got answer is 9.54% through XIRR because it calculates entire period returns ,

    • vinay said

      My take on Q.2-

      House value after 3 years 7558272
      Affordable loan 4000000
      Value of FD invested into debt after 2 years- =FV(0.12;2;0;-800000;1) – 1,003,520.00
      Value of investment – 30000pm after 2 years – =FV(1.15^(1/12)-1;2*12;-30000;0;1) – 835,545.13
      Value of investment in liquid fund in 3rd year- =FV(1.05^(1/12)-1;12;-30000;-(1003520+835545);1) – 2,300,695.58
      Difference between fund required and value of own funds- =7558272-4000000-2300695 = 1257577
      Answer b- shortfall of 12.58 lakh

  9. Manish said

    Dear jasbir,

    Vinay’s solution is perfect,the catch is to invest the additional 30000 rs p.m in the liquid fund along with the lumsump accumulated investments of equity and debt.i would like to thank mr niraj jain for bringing this clarity in the same link suggested by u.

  10. Dear sir…today i cleared my investment planning exam with B grade. All above mentioned questions were there in exam. Thanx a lot sir…sir i got a question
    Q There are two securities in portfolio A and B. weight of A and B is 30:70. Standard deviation of A is 15% and B is 12%. covariance between securities was 3. calculate portfolio risk.

  11. manisha said

    hi
    prashant sir ,

    pls explain me this question..

    A invested 1o lakh in beginning of year in equity, corporate bond, government sec and alternate investment in proportion 35:35:20:10. A year after making investment it generated return which were 14%,10%,6%,16% respectively. If investor followed constant mix policy his plan of action would be?
    a. Keep the portfolio under changed
    b. Buy equity of rs 9800 and alternate investment of rs 4800 and sell corporate bond of rs 4200 and government sec of rs 10,400.
    c. Increase the exposure of alternate investment and equity
    d. Sell equity of rs 9800 and alternate investment of rs 4800 and buy corporate bond of rs 4200 and government sec of rs 10,400.

    regards

    manisha

  12. manisha said

    hi prashant sir
    pls also help me in this question

    XYZ company paid dividend 2, recently of common stock; dividend expected to grow by 20% for next 3 years, after which expect to stabilize at 10% growth. If required rate of return is 15%. How much maximum price would you pay today to buy stock?
    a. 82.5
    b. 43.5
    c. 52
    d. 50

    as I m little bit confuse in this question while solving through cash flow.can you pls explain the procedure…I will be thankful to you..

    regards
    manisha

  13. jyoti1752 said

    Hi all
    I have solved all questions given above ,pls somebody verify it acording to answer is it write or wrong

    Q.1 : 11319139.59 (A)
    Q.2 : 1257576.28 (B)
    Q 3 : 14 month (c)
    Q 4 : 6030973.07 (B)
    Q 5 : 14.16% (unable to get write pls post the solution)
    Q 6 : 14.54% (there is no option )
    Q 9 : .77299 (B)
    Q. 10 : sell the security equity 9800 and alternate investment 4800, and buy the corporate bond 4200 and goverment security 10499 ( D)

    please reply

    • Dear Jyoti,

      I have published a similar post. Probable answers in the post will be published in couple of days. Hence you will be able to check and share the corrections if any.

      Regards,
      Prashant V Shah.

  14. jyoti1752 said

    Thanks prashant sir

    sir i am little bit confused about Q.2 , in question given that while investing in third year aditional investment will continue then answer will come around shortfall of 12.58 lakh but if investing in third year without aditional investment then answer is shortfall of 16 lakh
    pls sir clearify it .

  15. venkat53 said

    Dear Sir,

    For Q.No.4 I got a answer of Rs.63.67L

    Can you explain if it is a wrong answer.

  16. HI,
    https://prashantvshah.wordpress.com/2012/05/26/retirement-planning-practice-questions-3-cfp/#comments ref comment no 57 for this sol .

  17. Akshaya Priya said

    I think this site will be more helpful to clear and become cfp….. thanks to all

  18. jyoti1752 said

    Hi jasbeer

    i have doubt about Q.2 as i said above there may be possibilty between option a & b . i solved above question and get answer b shrortfall of 12.57 lakh , pls clearify that while investing in third year should i continue aditional investment?

  19. Manish said

    Dear jyoti,

    Yes you have to continue the additional investment in the third year and your answer is right.

  20. jyoti1752 said

    Thanks manish..

  21. Yash said

    Hello Prashant Sir !! Can you please guide me on how to prepare for the AFP module ?? I have my exam on 20th of November, and this would be my first attempt. I have done the 6 case studies given on this site. What else can i do ?? Please gudie me.

    Regards
    Yash

  22. hi,
    Dear all,

    can anyone expline me qust no 7 with step . as i am able to solve only 1st step

    set end, n -180, i – 8.5, pv -2500000, pmt 24618, fv – o.
    amrt – pm1 -1 , pm2-11, n -180 , pv – -25000000, pmt – -24618, bal solve – 2421238

    i had also seen d above comment for sol but able to understood no of yrs and pm 1 and pm2 so pl expline with step

  23. Dear jasbir,
    can pl help me with this quest as u had gv d ip

    Q There are two securities in portfolio A and B. weight of A and B is 30:70. Standard deviation of A is 15% and B is 12%. covariance between securities was 3. calculate portfolio risk.

    and above loan cal also if possible

  24. Manish said

    Dear zalak,

    The stated question can be solved by applying the formula as follow:-

    sd of two security portflio = square root of ((w1^2*s1^2)+(w2^2*s2^2)+(2*w1*w2*r*s1*s2))

    step 1.)find the r (coefficient correlation) r = cov/(sd of a * sd of b).

    cov=3
    sd of a = 15
    sd of b = 12
    r = 3/(15*12) =0.016667.

    step 2.)find the sd of two security portflio with the help of the above mentioned formula

    sd = portfolio risk = 9.59%.

  25. Dear all,
    pl help me with fol sum as i am able to solve only 2 steps

    7. Mr. B bought the house by availing a housing loan of rs 25 lakh for 15 yrs at a variable rate of interest. The initial rate was 8.5% & the fixed EMI was in May 2008. The finance company raise the rate to 9.25% pa effective from EMI due on April 2009. The finance company retain the same EMI but increased the outstanding tenure. Mr. B received a bonus of rs 2.5 lakh from her employer in May 2010. What amount she should prepare to invest to bring back tenure to original contract period with effect from June 2010?
    a. 75,814
    b. 111,215
    c. 78,681
    d. 109,543

    8. You purchase 500 shares of a company at rs 205 per share on 1st July 2011. The dividend of rs 1100 and rs 1300 were received respectively in August 2011 and September 2012. On 1st January 2013 the share were sold for rs 1.15 lakh. Your holding period return comes to?

    • Manish said

      Dear zalak,

      step 1.)First you have to calculate the emi of the loan according the original loan contract.The emi comes to 24618.The fixed emi commenced on may 2008

      step 2.)a.)Before computing the “increased outstanding tenure”in order to retain the same emi,first you have to find out the o/s loan balance after 11 months (from may 2008 to march 2009).Therefore the o/s loan balance as on 31 march 2009 is 2421238.

      b.)Now as you know that finance company has raise the rate to 9.25% which effect from april 2008 and along with that it retains the same emi.In this case you have to compute the new nper in order retain the same emi.Old nper was 180 months.New nper can be compute as follow

      pv = 2421238 (o/s loan)
      rate = 9.25%/12 (new rate)
      pmt = 24618 (retains the same emi)
      nper = ? (will increase as you want to retain the same emi)
      nper = 184 months.

      step 3.) a.)He received a bonus in may 2010,so again we have to calculate the o/s loan amt after 14 months (april 2008 to may 2008).Therefore the o/s loan balance is Rs.2333562.

      b.)Now he wants to bring back his loan tenure to original contract period,for tha purpose he has to invest some amt out of his bonus.so we will calculate the pv of future cash flows (emi) and the difference between the o/s loan amt and pv will b the answer.

      pmt = 24618
      nper = 155 (180-25)
      rate = 9.25%/12
      pv = 2222347.

      o/s loan amt = 2333562
      less = – 2222347
      balance = 111214 (is the amount which he has to invest in order bring back his original loan tenure).

      In other words Rs.111214 is the prepayment required to be paid.

  26. Thanks Manish for quick reply,

    Regards,
    Zalak thakker

  27. Dear all,
    in question no 6 i am confused in one line only can anyone expline me .

    . The NAV on 22nd October 2012 was rs 16.50. The investor redeemed all units on 28 January 2013 at a price of rs 19.10 . What holding period return was obtained by investor?

    22-Oct-12 15215.55 16.5 922.1544445- (units)

    how figure 922.154 came . i am ok with rest of d thing

    qust – 6. An investor purchased 5000 units of an equity oriented MF scheme under dividend reinvestment scheme on 1st June 2012 at NAV of rs 18.46 along with systematic investment plan of rs 5000, each for 6 months. The SIP dates are 1st of every month beginning 1st July 2012. The NAV at which additional unit were bought through SIP were rs 19.06, rs 18.51, rs 17.23, rs 18.97, rs 16.75 and rs 17.95 on 15 October 2012. The scheme declared a dividend of 25% on face value of rs 10 per unit which record date being 21st October 2012. The NAV on 22nd October 2012 was rs 16.50. The investor redeemed all units on 28 January 2013 at a price of rs 19.10 . What holding period return was obtained by investor?

    Regards ,
    Zalak thakker

    • Manish said

      Dear zalak,

      On Record date i.e( 21st october 2012),he received a dividend of 25% on face value of rs 10 per unit.

      Therefore dividend per unit will be = 25% on rs 10 = 2.5 Rs per unit.

      Till october he has accumulated 6086 units.If he is getting 2.5 Rs dividend per unit then how much dividend will he receive on 6086 units held by him.

      1 unit = 2.5 Rs dividend
      6086 units = ?.15215 Rs.

      This dividend will be reinvested on 22 october at the nav of Rs 16.50 per unit.So if he invest 15215 RS at Rs 16.50 per unit then he will get = 15215/16.50 = 922.154 units.

      Further on 28 jan 2013 he redeemed all units at a price of Rs 19.10.

      Total Units accumulated = 7585
      nav = Rs 19.10
      Redemption amount = Rs 144881

      Holding period return = amount redeemed – Total investment (excluding dividend reinvestment amt of rs 15215)*100/total investment (excluding dividend reinvestment).

      Hpr =( (144881-122300)*100)/122300
      Hpr = 18.46%

  28. Dear Manish,
    For qust 1 i am getting ans 113 pl check .

    For 1st 5 yr

    future value of equity – 533639
    ,, ,, ,, debt – 342475

    ,, ,, ,, liquid – 136433

    for next 5 yr

    future value of equity – 1373760
    ,, ,, debt – 1535873
    ,, ,, liquid – 279537

    in d same way i had done for next 10 yr

    final ans 113 pl check for d same and correct me if i am wrong .

    i think somewhere i hd mistake in 3 rd step for 10 yr pl check for d same.

    • Manish said

      Dear zalak,

      Regret For late reply rebalancing should not be done in the question.Try again if you still face any problem then feel free to ask for a detail solution.

    • Manish said

      Dear zalak,

      Regret For late reply rebalancing should not be done while solving the question.Try again if you still face any problem then feel free to ask for a detail solution.

  29. Hi,

    Today i pass ip with B grade, i got 6 question from this blog . two more diffrent 1 mark qust i got
    1- call feature in corporate bond means –

    2- buy and hold stretagy works in
    a) arbritage
    b)hedging
    c)stock trading
    d)stock investing

    Thanks prashant sir , manish sir , jasbir , and all i had cleard all the 4 modules with 1 st attempt with d help of yours.

  30. JAYANTI PARIDA said

    Thanks to Prashant Sir and others for helping me to solve the questions.i am also preparing to to give the test.i have one doubt regarding one question i.e wheather we are cfp applicant or cfp aspirant or any other name.pl.write the correct ans.another question when bank park money with RBI it is BANK RATE OR REPO.please answer my question.

  31. vishal said

    question Q.9 not getting answer….can provide me with some hint or solution……….

  32. sol for qut 9-

    total amt invested – 6 lacs , portfolio value redeem – ( 213000+279000+258000)= 750000

    in 3 yrs he recd dividend of rs 7500 semi – annully and that is kept in saving a/c @ 4.5% so fv in 3 yrs.

    set – end , n- 6 (3*2) i – 4.5, pv – 0 , pmt -7500, find fv 47578 p/y – 2 , ( for bond)

    (for stock) use cash flow , i – 4.5 , take yrs 1 – 0 , 2 -2725, 3- 3125 , 4 – 2965, solve nfv – ( 9206)

    SO total we get = 750000+47579+9206= 806785

    mode – begin
    n=3, pv =-6lacs , fv 806785 , solve i -(10.3745)

    solve IRR using i (10.3745) and R – 9.533 ANS 0.77%

  33. tarangtg said

    could anyone help me with the soultion for question 8

  34. Zohra said

    Sir,
    I am a little doubtful about the third question that’s mentioned here.
    Firstly, it should be stated clearly that 30% of the annual income goes towards the loan and remaining towards the household. Its been stated the other way round..

    Secondly, in the solution the requirement is Rs. 2268000 but that’s not the six months accumulation. It is the 6 years accumulation. So probably there’s an error in the question or if I may be wrong then can you please explain me the same..

    Thanks and regards,

  35. Manas said

    Hello Prashant Sir,

    I cleared my IP exam yesterday with A grade and this is only because the paper had almost all the sums presented by you and discussed here. I am really thankful to you as well as the other members for their active discussion and solutions.

    Thank you 🙂

  36. vrinda pal said

    thank you prashant sir ..this website really helped me . I cleared my IP exam . and all the questions mentioned above appeared .
    thanks to all who shared their experiences nd solutions . it really helped .

    vrinda pal

  37. Parshva Shah said

    In a Limited Liability Partnership, LL means_________.

  38. Ganesh said

    i have cleared my ip exam with b grade. paper was easy as most of the question (1, 2 ,5,7,8,9) came in the exam and some question on holding period ,Jensen alpha, Sharpe ratio,annualized return ,three sums on ddm.

    now m planning to give retirement planning and employee benefits in 4 weeks time 🙂

  39. Trimurthy.k said

    I was just cleared my IP module With C grade. paper was easy sum no. 1,2,3,5 asked.
    this site is very useful to cfp students……
    thank you prashanth sir for your valuable contribution in my success.

  40. ankita said

    hello sir, I m going to appear for investment planning exam I would be thankful if you can help me,
    from where do I study the theory questions asked in the exams.

  41. harish said

    Dear prasanth shah sir
    I have already one time fail in IP exam with D grade,please give me any suggestion to clear this examination plzzzzzzz sir

  42. HARISH said

    Hello sirrr plz help me sir ,I am fail in investment planning exam

    • Dear Harish,

      Investment Planning and Insurance Planning happens to be the easy exams in our curriculum. Focus on theory and different methods. Also solve questions which are there on the site. You will be through surely.

      Fell free to ask any queries.

      Regards,
      Prashant.

  43. In Q.5, why is the period for coupon calculation taken as 11?

  44. Vimal said

    Dear Prashant Sir,

    I cleared my IP exam yesterday. Thank you as well as the other members for their active discussion and solutions.

  45. Krishna said

    Dear Prashant sir,
    i am still not able to get solution for Q.11 could you please elaborate it ??
    and i am confused with Q.1 and Q.4 i mean what is the basis diffrence between as far as i knw both are asset allocation type but why difference solution??

    • Manish said

      Dear Krishna,

      In question 1 Re-balancing of the portfolio should not be done,While in question 4 we are required to re-balance the portfolio value after the specified period of 10 years.Re-balancing means to adjust the total accumulated amount of Asset classes in the stated ratio and then reinvest the same along with regular investments.For Example in the problem,After 10 yrs you will get the portfolio value as follows:-
      Equity=11,32,649
      Debt=4,08,924
      portfolio value=15,41,574

      Re-balance the portfolio in the ratio of 40:60.
      Equity=6,16,629(You will sell 5,16,020 worth of shares from 11,32,649 and reinvest the balance)
      Debt=9,24,944(You will invest additional 5,16,020 in debt).

      Value Of Equity After 10 yrs:-

      Equity=6,16,629(pv)(15,41,574*40%)
      Investment=60000(pmt) (150000*40%)
      Nper=10
      Rate=10.50%
      fv=2755902

      Value Of Debt After 10 yrs:-

      Debt=9,24,944(pv)(15,41,574*60%)
      Investment=90000(pmt)(150000*60%)
      Nper=10
      Rate=7.50%
      fv=32,75,070

      Total accumulation=60,30,973.

      • Krishna said

        Thanks you so much Manish Sir!!
        and do u any idea of Q.11
        Do 2
        D1 2.4 (2*1.2)
        D2 2.88 (2.4*1.2)
        D3 3.456 (2.88*1.2)

        STEP 1
        Find NPV in calculator for cash flow below
        1 0
        2 2.4
        3 2.88
        4 3.456
        NPV Rs. 6.54

        STEP 2
        Use Formula:
        (D*(1+G))/(R-G)
        therefore, NPV of all future cash flow of dividends 76.032

        STEP 3
        Find PV of above figure
        Rs. 76.032 is NPV as on 4th year so find its PV as on date
        n 4
        i 15%
        PV Rs. -43.47
        PMT 0
        FV 76.032

        Hence, Intrinic value of share as on date is 6.54+43.47 Rs. 50.01

        This is my ans i dnt knw if it correct?

  46. Manish said

    Dear krishna,

    The intrinsic value is Rs.56 and the maximum price you would pay to buy the stock is Rs,52 (i.e) option c. Request you to scroll the comment section of this post.Look out the comment no.12 for calculation.

  47. Krishna said

    Alrite I got it Thanks a lot!

  48. hemareddy said

    sir, pla give me practice questions for investment planning exam, im going to take my exam on 8th dec 2016,

  49. chaitanya said

    Prashanth sir please guide me on investment planning

  50. chaitanya said

    sir please let me know asset allocation problems

  51. chaitanya said

    Hi Sir i cleared IP exam with B grade i feel more happy ….all the questions were repeated in the exam thanks to you sir for this site and thanks to every one for giving guidelines

  52. chaitanya said

    thank you sir ………. your valuable guidelines and explanations it helped me to clear exam and many of people helped in this site thanks to every one 🙂

    • Rashmi said

      Dear, chaitanya
      Pls guide me for investment planning. On which type of questions should focus? Can u tell some of questions which had asked in your exam? Please guide. M going to give exam on 21st march. Please do the needful.

  53. chaitanya said

    2053 call option pays 35 and current market price is 2035 find the in the money option

    A: In-the-money option 18

  54. Rashmi said

    Whoever has cleared their investment planning exam few months back or recently pls help for ip module. Kindly guide for ip module. It will be great help.

    Prashant sir, kindly post few more questions for ip. I have noted down questions which are on this site.
    Thanks.

  55. vidisha said

    Plz guide me for question no. 1.
    How to cal FV amt i.e899213.05 and 2332327

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