PVS (Prashant V Shah)

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Archive for July, 2015

Practice questions Insurance Planning – CFP

Posted by Prashant Shah on July 25, 2015

Dear all, here are some more questions to practice for insurance, suggested by readers of this blog.

1.

A Client has a 20-year moneyback policy with Sum Assured of Rs. 200000, Premium per annum 13,672. 20% will be paid to the policyholder at the end of the 5th year, 10th and the 15th year and 40% for the 20th year. The client has received the 3rd moneyback. You estimate the gross returns presently in the policy considering reversionary bonus of Rs. 50/1000 Sum Assured. You compare the cost benefit if the client pays all premiums & survives the policy & also gets Rs. 150/1000 Sum Assured as loyalty Bonus. You conclude that ______

  1. The additional inflow on 5 future premiums less opportunity cost would be 12% return
  2. The additional inflow on 5 future premiums less opportunity cost would be more than 19% return
  3. The additional inflow on 5 future premiums less opportunity cost would be 30% returns or more
  4. The overall return improves marginally by 1.15% p.a.

 

2.

A family spends 35000 pm. There is a loan outstanding of 42 lakhs. The client’s son wants to study abroad after 5 years and 50 lakhs is the cost against which he has a saving of 27 lakhs. Find Inflation adjusted life cover for replacing the client, for 5 years of family expense & such life expenses @ 40% for souse’s 30 years survival. Inflation is 5.5% and Return is 9.5%

  1. 109 Lakhs
  2. 101 Lakhs
  3. 106 Lakhs
  4. 91 Lakhs

3.

A client has a cash asset of 70 Lakhs, a housing loan of 52 lakhs. 6 years hence wants 1 cr to set up child business and 10 years hence wants 50 Lakh for daughter’s marriage. What is the life cover required? Inflation adjusted monthly expense 50000 now for his family & that of the spouse 35 years survival continuing after 10 years. Inflation is 7% & investment rate is 11%

  1. 220 Lakh
  2. 299 Lakh
  3. 144 Lakh
  4. 162 Lakh

4.

A client has a car loan of 10 lakhs with an EMI of 21494/m @ 10.5% and 2 years left for the loan. He also has a personal loan of 3.2 lakhs with an EMI of 11569/m @ 18% and 2 years left. He receives a sudden inflow of 4 lakhs which he can put in 10% FD for 2 years. Will you advice to repay the loan & invest the EMI systematically every month in a tax efficient instrument @ 9%?

  1. Yes the accumulated amount after 2 years would be more by atleast 20,000 with lower tax than FD
  2. No, FD maturity will be 8,47,000 against total outflow of 7,93,500 in 2 years in loan
  3. No the FD interest would be 1,47,000 where as he may save 98,000 in interest
  4. Not nice to leave 10% for 9%
  • FV OF FD
  • PV = 4,00,000
  • N = 2
  • I/Y = 10
  • FV1 = 4,84,000
  • INVESTMENT OF SURPLUS AMOUNT
  • FIND PV OF CAR LOAN
  • FIND PV OF PERSONAL LOAN
  • REPAY PERSONAL LOAN AND USE REMAINING AMOUNT TO PAY CAR LOAN
  • FIND PMT FOR REMAINING CAR LOAN
  • AMOUNT OF INVESTMENT = 21494 +11569 – NEW CAR LOAN PMT
  • FINAL ACCUMULATION:
  • PMT = AMT OF INVESTMENT
  • N = 24
  • I/Y = MNR OF 9%
  • FV2 = ?
  • INCREASE IN WEALTH = FV2 – 484000

Posted in CFP, Insurance Planning | 22 Comments »