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Important Questions – General

Posted by Prashant Shah on August 14, 2014

1.

Mr. A invests Rs.50,000 pa in debt mutual fund which gives 8.5% return pa. Investment will increase at 10% pa. Mr. B is investing Rs.40,000 in the same debt mutual fund along with investing Rs.10,000 in growth oriented equity fund which has return of 11% pa with same growth rate in investment and for the same investment period. The difference between the effective return earned is

Solution:

Mr. A will earn the effective return of 8.5%

For Mr. B will earn the effective return of 8.5%

Hence the difference is 9.06-8.5 = 0.56%

 

2.

Mr. A took loan on 1st July 2009 of Rs.30 lakh at 10.25% floating rate for 20 years. Bank intimated that his interest rate has increased to 11% with effect from Jan 2011, thus causing an increase in EMI to end loan with same tenure. He negotiated with bank and his interest rate was reduced to 10.5% from March 2011 along with 1% processing fee on sanctioned loan. Calculate absolute amount saved due to refinancing.

LOAN 1ST JULY 3000000
EMI $29,449.30
OPENING INT EMI CAP O/S
1 3000000 25625 29449.3 3824 2996176
2 2996175.7 25592 29449.3 3857 2992319
3 2992318.734 25559 29449.3 3890 2988429
4 2988428.823 25526 29449.3 3923 2984506
5 2984505.686 25493 29449.3 3957 2980549
6 2980549.039 25459 29449.3 3990 2976559
7 2976558.595 25425 29449.3 4025 2972534
8 2972534.067 25390 29449.3 4059 2968475
9 2968475.162 25356 29449.3 4094 2964382
10 2964381.587 25321 29449.3 4129 2960253
11 2960253.046 25285 29449.3 4164 2956089
12 2956089.241 25250 29449.3 4199 2951890
13 2951889.87 25214 29449.3 4235 2947655
14 2947654.629 25178 29449.3 4271 2943383
15 2943383.213 25141 29449.3 4308 2939075
16 2939075.311 25105 29449.3 4345 2934731
17 2934730.613 25067 29449.3 4382 2930349
18 2930348.803 25030 29449.3 4419 2925930
NEW EMI@11% $30,896.15
1 2925930 26821 30896 4075 2921854
2 2921854 26784 30896 4112 2917742
PROCESSING 29177
REVISED EMI@10.5% $29,934
SAVINGS 963 211,775
LESS: PROCESSING 29,177
NET 182,598

 

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10 Responses to “Important Questions – General”

  1. Pratik said

    Dear FRND FOR THE ABOVE QUESTION I HAVE SOLVE BELOW MENTIONED KINDLY SUGGEST ITS RIGHT OR NOT

    (1) END MODE– N- 20*12 = 240. I -10.25 PV – 3000000 P/Y -12 C/Y –12 FIND PMT — 29449
    (2) BALANCE LOAN AMT 1 JAN 2011 —- 18 INSTALLMENT PAYMENT PAID — BALANCE OUTSTANDING AMT — 2925929.535
    (3) INTEREST CHANGE == 11% FROM JAN TO MARCH 2011 === 2 INSTALLMENT PAID ==== NEW EMI ===30896=== BALANCE OUTSTANDING AMT — 2917741.925
    (4) He negotiated with bank and his interest rate was reduced to 10.5% from March 2011 along with 1% processing fee on sanctioned loan
    (5) END MODE === N = 240-18-2 == 220 I ==10.5% PV == 2917741.925 P/Y -12 C/Y -12 FIND PMT — 29933.53
    (6) 11% INTEREST EMI — 30896*220 === 6797120 AND BANK CHANGE NEW INTERST RATE — 10.25% EMI AND 1% PROCEESING FEES — 29177.41*220 — 6585376 + 29177.41 — 6614554
    (7) Absolute amount saved TOTAL –(6797120)—(6614554) ===(182566)

  2. jyoti1752 said

    Hi pratik

    the absolute amount saved 145921
    sol : balance amount till the march 2917741.92
    Add prcessing fee 1% 29177.42
    total balance 2917741.92
    now find new EMIs at rate applied 10.5% = 30232.87

    EMI at earlier rate 11% = 30896.15

    now we can find difference between both EMIs is 663.28
    total saved amount – 663.28*220 = 145921.34

    • I think you have added processing fees to the o/s balance. Let me check whether that approach is correct or not when nothing is mentioned in the questions.

      Rest of the things are perfect.

      Prashant.

  3. jyoti1752 said

    sir i was solved wrong, following solution are correct
    sol. balance amount 2917741.92
    processing fee 1% 29177.42
    EMIs on above 10.5% 29933.53
    EMIs on earlier rate 11% 30896.15
    Difference 962.62
    multiply by 220 = 962.62*220 =211776.4
    now precessing fee add on this saved amound = 29177.41
    therefore total saved amount is =240953.82

  4. jyoti1752 said

    This is because interest is charged only on principal amount not on processing fee

  5. jyoti1752 said

    No sir,prcessing fee 1% which charged on negociated EMIs that is paying aditional sum to getting rate 10.5% and earlier rate is 11% ,therefore for getting absolute amount we should add proceesing fee on latter EMIs (the overall amount which company has charged ) and then reduced from earlier EMIs.

  6. jyoti1752 said

    Sorry sir you are right sir above i have created mistake on calculation just i cheaked absolute saving is 182598

  7. I wrote my IP exam yesterday and cleared it..i wanted to extend my thanks and appreciation to Mr.prashant and everyone who has contributed towards making this blog to equip the candidates with all necessary knowledge and tricks to get through the exam.I hope the help would continue.A piece of suggestion to anyone who is planning to write IP exam.Focus on TVM and the kind of questions mentioned on this blog.3 Questions carrying 4 marks each relating to jensens alpha were asked.They were very easy but pretty tricky for once.Besides that there is no point in mugging up things,try clearing up your concepts strongly.Hope this would help someone.

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