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Archive for March, 2014

Important Questions Insurance Planning CFP

Posted by Prashant Shah on March 27, 2014

Following Questions have been suggested by one of the reader as important for CFP exam. I don’t own any of the question. Suggest modifications in the questions if any.

Q1. A bunglow was constructed at a cost of rs 2crore in 2006 and a further Rs1crore was spent over on furnishing in 2008.the bunglow is valued at Rs12 crore in 2012.the costs of construction and furnishing have escalated rate 10% and 15% respectively over the period.the owner wants to totally absolve himself of any expences,in case bunglow is razed down due to some peril. what value would you advise the owner to insure the property?

A) 5.34 Crore.

B)3.50 crore.

C)5.90 crore.

D)5.29 crore.


Q2. A client’s 20 year money back policy of sum assured rs 2 lakh has annual premium of rs 13672, Policy pays back 20% of s.a after each of first three 5-years survival periods and another 40% of s.a on surviving full term. The client has received the third money back. You estimate the gross returns presently in the policy considering reversionary bonus of rs 50 per thousands s.a. you compare the cost benefit if the client pays all premiums and survives the policy and also gets rs 150 per thousand s.a as loyalty bonus. you conclude that _________.

a)the overall return improves marginally by 1.15% p.a

b)the additional in flow on 5 future premiums would amount to over 19% p.a returns

c) the additional in flow on 5 future premiums would amount to nearly 30% p.a returns

d) the additional in flow on 5 future premiums less opportunity cost would amount to nearly 12%

Solution: Suggestions invited for correction


1 -13672 1 -13672
2 -13672 2 -13672
3 -13672 3 -13672
4 -13672 4 -13672
5 -13672 5 -13672
6 26328 6 26328
7 -13672 7 -13672
8 -13672 8 -13672
9 -13672 9 -13672
10 -13672 10 -13672
11 26328 11 26328
12 -13672 12 -13672
13 -13672 13 -13672
14 -13672 14 -13672
15 -13672 15 -13672
16 190000 16 26328
IRR 4.80% 17 -13672
18 -13672
19 -13672
20 -13672
21 310000
IRR 5.95%

Q3. 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 liquidreserve?




d. 13 months

Solution: Same question in Investment Planning

900000 INCOME 1080000
270000 EPF 270000
270000 LOAN 270000
360000 HOUSEHOLD 378000
SAVINGS 162000
YEAR 1.166666667


Q4. An industrialist started a project on 1st nov 2009 with own capital of rs 1crore. He arranged a project of rs 1.5crore by a back on 1st july 2009 at a rate of 12%p.a. the terms of finance were quarterly invested.only payments up to six quarter and the repayment of premium in three equal installments from the end of seven quarter along with interest on the loan outstanding.he infuced fresh own funds towards working capital of rs 20 lakh on 7th december 2009 and rs 30 lakh on 4th november 2010.the project completed with a profit of rs 4.5crore on 6th september 2012.find the return generated by the project…






Q5. A company in the business of warehousing.in 2012,insured its warehouse premises also calamity for a value of rs 1.65cr towards liability coverage,separate insurance towards clients for rs 15cr each were taken to cover the goods kept at any time.the company has cover of rs 10cr also.the warehouse was completely destroyed in fire.the registered amount of rs 30cr.what insurance can be setteled in the company’s claim?

a)rs 1.65 cr to the company and rs 30cr towards liablity to clients.

b) nil to the company and rs 26.65cr towards liablity to clients.

c) rs 1.65 cr to the company and rs 17.5cr towards liablity to clients.

d) rs 1.65cr to the company and rs 25cr towards liability to clients.


Q6. CD is promissory note issued by Bank and Financial Institute. That is part of?

A) CRR only

B) Both CRR and SLR

C) Neither CRR nor SLR

D) SLR only


Q7. Car comprehensive loan is 1.5 lakh. Deducted 5000 from insurance. The car is damaged for an amount of 60 k with 10k accessories he forgets to declare it. Insurance he gets 30k. What will be the claim he will get.

a) 50k, and 5 k

b) 45k and 15k

c) 50 k and 10k

d) 45 k and 10k



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