1. Ashwin wants to provide his contribution of income of gross salary to his family.

He consumes 45% of the salary on himself. You advise him that the Child Plan
covers a different goal. Assume the cover is invested in Debt fund, he is expected to
earn till retirement age. By what amount he should cover his life by taking a Term
Insurance for _______ immediately ? (plz ignore taxes and charges if applicable)
(Present Age:34; Retirement Age:60; Money Back Policy S.A.Rs.4 lakh ; Child Plan
S.A.Rs.20 lakh; Debt MF 7%)

Bas ic Salary
DA
HRA
Trans port Allowance
Medical Reimburs ement
Entertainment Allowance
PF & Superannuation
Gros s Salary
Pers onal exp (45%)
Net Salary for family (55%)
Pres ent Age
Retirement Age
Debt MF Rate
PV of Ins urance Requirement
Exis ting Money Back SA
TERM INSURANCE required for
(i.e. Approx 77 lakhs )

Monthly in Rs
48000
24000
12000
4000
1250
5000
5760
100010
45004.5
55005.5
34
60
7%
8,098,705
400,000
7,698,705

Ashwin wants to protect his family by Term Insurance. He consumes 45%

of the salary to pay taxes and related expenses. His Salary is going to
increase at 5% p.a. in present scenario. So what amount of Term Insurance
he should get? (Assume she will invest the claim in Debt Scheme)

Bas ic Salary
DA
HRA
Trans port Allowance
Medical Reimburs ement
Entertainment Allowance
PF & Superannuation
Gross Salary ( A )
Personal exp (45%) ( B )
Net Salary for family (55%) (AB)
Pres ent Age
Retirement Age
Debt MF Rate
Growth in Salary
Real Rate Pos t Growth rate
PV of Insurance Requirement
= Insurance cover required.

Monthly in Rs
48000
24000
12000
4000
1250
5000
5760
100010
45004.5
55005.5
34
60
7%
5%
1.90%
13,574,387

1. Mr. Ashwin would like to know about current FY tax

liability. So, you have calculate tax liability for AY
2015-16 for Mr.Ashwin _____________
Basic Salary : Rs.
48,000
Dearness
Allowance1 :
50% of Basic
salary

Income From Salary

Bas ic Salary

576000

House Rent
allowance : Rs.
12,000

Dearnes s Allowance

288000

Transport
Allowance : Rs.
4,000

Hous e rent Allowance

144000

Medical
Reimbursement :
Actual expenses
up to Rs. 1,250
per month

Trans port Allowance

48000

Les s : Exempt
Medical reimburs ement
Les s : Exempt
Entertainment Allowance
Gross Salary (A)
Income From House Property
SOP - Loss (B)
Income From Other Source

9600
15000
15000

Entertainment
Allowance : Rs.
5,000
PF &
Superannuation :
12% of Basic
Salary

38400
0
60000
1106400
-93496.66933 WN1

Bank interest
income from April 10% p.a
2014 to August
(Compounding
2014. So interest Quarterly)
income for 5
Step 1: To find
months to be
effective annual
considered
interest rate use
Conversion
Bank FD interest (C)

10331.047011315

Total Income (A+B+C)

Deductions
u/s 80C (res tricted to 150000)
EPF
Child Plan
Net taxable income

1023234.3776813

Tax liability

Monthly rate of interest

to be earned on
0.826% deposits

873234.37768132
0-250000
250001-500000
500001-1000000
abv 10 lakhs

Nil

Total
Add: Ed. Ces s
Tax Liability
WN 1 - Los s from SOP
Find Emi
AMRT - in calculator
PM1
PM2
INT

Annual Effective Rateb

10.381% of Interest

Function

150000
69120
44347

10%
25000
20% 74646.87553626
30%
0
99646.87553626
2989.406266088
102636.281802

$15,759.21
66
77
93496.66933

[(5*12)+5]+1
(66+11)

2. Ashwin wants to accumulate the funds for the higher education of Prateek (Age 4) and
Aslia (Age 1). For accumulation of fund you recommend Ashwin to invest in a separate
scheme of Equity MF and Debt MF in the ratio of 75:25 by SIP. However for this purpose
1/3rd of the existing balance of Equity Shares are redeemed at beginning of 18th yr of
Prateek and redeemed it entirely till the 18th yr of Aslia. These amounts which are
redeemed are invested in the liquid fund for investment purpose. Calculate the amount of
SIP in Equity MF and Debt MF?
(Goal: To provide for higher education of Prateek and Aslia. The expenses, at current cost,
required for each at their respective age of 18 , are Rs.3 lakh and for 4 subsequent years,
Rs.2 lakh p.a.) (Assumption: Equity 11%; Debt 7%; Liquid 5.5%; Inflation 5.5%)
(Present Equity Share - Rs.632000)

Inflation Rate
Liquid Fund Rate

5.50%
5.50%

Goal Amount Required

1s t yr
2nd yr
3rd yr
4th yr
5th yr

300000
200000
200000
200000
200000

Pres ent Equity Share

Inters t rate

632000
11%

No.of yrs from now

Prateek

As lia

14
15
16
17
18
19
20
21

634,827
446,495
471,053
496,960
524,293
0
0
0

745,441
524,293
553,129
583,551
615,647

Total at age 18 of each

2,724,199

1/3rd withdrawn

Balance after withdrawal

1,816,132

Balance required
for Prateek

FV till As lia's Age 18

2,483,799

sumedhas life-time. Such

corpus shall
Amount
of SIP
generate an
inflation linked monthly
stream of income, if invested
in Risk-free instruments. For
this purpose he wishes to
utilize his existing Balanced
MF scheme of which 1/3rd is
redeemed at the end of 8th ,
16th , 26th year and the
amount redeemed is invested
in Debt MF along with
monthly SIP of _____amount to
accumulate the Retirement
corpus. The SIP amount would
be?

Prateek's Education
Equity MF
Debt MF
75
25
11%
7%

14

42,399
51,998
249,483

3,977

480

40000
34
60
80

Sumedha's life after Ashwin's

lifetime
Ris k-free ins trument rate
Inflation rate
Real Rate

85
6.50%
5.50%
0.95%
PV at respective
age

No. of years
FV of Current Expenses in 1st
month of retirement
FV of Current Expenses in 1st
month after lifeexpectancy

Debt MF rate
Balanced MF rate
Exis ting Balanced MF
PV of amount redeemed after no .
of yrs
8
16
26

745,441
496,960
496,960
496,960
496,960
2,733,282

908,066

1,419,634

Withdrawal for As lia

2,483,799

Balance reqd for Aslia

249,483

17

7,019

35,693
1,419,634

Current Monthly expens e

Pres ent Age
Retirement Age
Life expectancy Age

Amount required for

Aslia at beg of 18 years

Aslia's Education
Equity MF
Debt MF
75
25
11%
7%
No. of years till
Aslia's Age of 18

28,674

634,827
423,218
423,218
423,218
423,218

2,327,701

FV till Prateek's Age 18

Ratio
3.
Ashwin
has accumulated
Interes
t Rate
additional retirement corpus
of Rs.1.5 Crore at the age of
No. Yr
of by
years
till Prateek's
Age of
60
statutory
investment
18 which he has already
in
invested. For retirement
purpose
Ashwin
require
FV of Rs .100
SIP inwould
des ired
ratio
no change in his current
lifestyle till his lifetime and
Total of FV for Rs .100 SIP
thereafter 50% of preAmount Required
retirement
expenses till

Amount required for

Prateek at beg of 18
years

9,599

PV at time of
Retirement

160,925

20

35,211,005

35,211,005

234,770

13,764,565

3,906,343
39,117,348

7%
9%
328000

$653,560.55
868,174
1,370,188

Statutory Inves tment Corpus

15,000,000

Shorfall in required Corpus at time

of Retirement
Additional SIP required

21,441,553
25,077

Balance yrs in
FV of Amount trf Debt MF till
FV at time of
FV
to Debt MF
retirement
retirement
$217,853.52
217,854
18
736,330
289391.184219441
289,391
10
569,276
0
1,370,188
0
1,370,188
2,675,795

Ashwin is going to accumulate

Rs.3 Cr till his retirement. He
is going to curtail his
expenses by 20% after
retirement. He wants to cover
all future income till his wifes
survival. Calculate the Normal
rate of return where he can
invest?
Current Monthly expens e
Pres ent Age
Retirement Age
Life expectancy Age
Sumedha's life after Ashwin's
lifetime
Inflation Rate

40000
34
60
80
85
5.50%

FV of Current expens es

128,740.12569

Corpus accumulated at
Retirement

30,000,000

Monthly effective Real Rate

0.17696%

Annual Effective Real Rate = This

indicates inflation adjusted rate of
return

2.1443%

Nominal Rate : Use Inflation

adjusted rate of return
formula to determine Rate of
Return to earn

7.76%

8. For their bigger house to be purchased 1 year from now,

Ashwin needs Rs.10 lakhs towards down payment & certain
statutory expenses. You advise them to invest Rs.2.5 lakhs
immediately in an annual FMP which is expected to give posttax returns of 6.8% when opted for dividend reinvestment. In
addition a certain amount should be invested every quarter in
Quarterly FMP which is assumed to give a return of 4.8% p.a.
effectively. The money invested along with reinvestment of
dividend at maturity of quarter 2 & quarter 3 are rolled over
along with fresh investment. What amount needs to be
invested every quarter?
Immediate FMP Inves tment
Return
Maturity of FMP
4. You suggested to Ashwin to
Total Amount reqd.
use the moneys in the Equity
Balance
required
MF
portfolio
for the higher
Interes t
education
of Prateek and
Quarterly
FMP end of 10 yrs,
Aslia.
At the
1/3rd of the accumulated
money in the equity MF
portfolio are to be transferred
to a liquid MF Scheme. At the
end of 12 years, half the
money accumulated in the
equity funds are to be
transferred to the liquid MF
Scheme and the balance at
Inflation
the
end Rate
of 14 years. The
Liquid Fund
money
willRate
be utilized as and
when required from the liquid
MF. In addition you advise a
monthly
in a balance
GoalSIP
Amount
Required MF.
What is the SIP amount?
1s t yr
2nd yr
3rd yr
4th yr
5th yr

250000
6.80%
267,000
1,000,000
733,000
4.80%
238,661

5.50%
5.50%

300000
200000
200000
200000
200000

No.of yrs from now

Prateek

As lia

14
15
16
17
18
19
20
21

634,827
446,495
471,053
496,960
524,293
0
0
0

745,441
524,293
553,129
583,551
615,647

Amount required for

Prateek after 14 years
from now.
634,827
423,218
423,218
423,218
423,218

2,327,701

Amount required for

Aslia after 14 years
from now.

634,827
423,218
423,218
423,218
423,218
2,327,701

1
2
3
4
5
6
7
8
9

0
634827.438551
446495.298448
471052.539862
1242401.07389
1048586.50636
553129.382105
583551.498121
615646.830517
$4,020,573.78

Total reqd after 14 yrs from now.

Equity MF Portfolio
Rate of Equity MF
no. of yrs
FV

1/3rd trf to Liquid Fund

2/3rd continue
another 2 years
FV
1/2 trf to Liquid Fund
1/2 continue
another 2 years
FV

4,655,401

507000
11%
10
1,439,586
No. of yrs in
Liquid Fund
Liquid Fund
479,862

FV
594,465

959,724
2
1,182,476
591,238

658,063

591,238
2
728,465

Entire amt trf to Liquid Fund

728,465

728,465

Total in Liquid fund after 14 yrs

from now

1,980,992

Shortfall in required corpus

Rate of Balanced MF
no. of yrs
5. You suggested Ashwin to
Required
start
a SIPSIP
in Equity Index MF
for 17 yrs, then redeem in
such a way that 1/3rd of
outstanding market value be
redeemed at the end of 18yrs
and then at end of every year
till its full redemption on
Prateeks marriage. The funds
so redeemed should be
invested in Liquid MF to be
withdrawn for respective
marriage.
Whate should
Marriage expens
(currentbe
costhe
t)
SIP amount?

2,674,409
9%
14
8,172

No. of yrs in Prateek's marriage

No. of yrs in As lia's marriage
Inflation
FV at Prateek's marriage
FV at As lia's marriage
Liquid Fund Rate

23
26
5.50%
5,139,227
6,034,693
5.50%

PV of Aslia's marriage at time of

Prateek's marriage

5,139,227

1,500,000

Total Amount required for both

Prateek and Aslia at time of
Prateek's marriage

10,278,455

Equity Index MF
As s ume a SIP in Eq.Index MF
No. of yrs
FV

11%
100
17
56,532

After 18 yrs
FV

1
62,751

1/3 trf to Liquid Fund

2/3 continue
After 19 yrs
FV

41,834
1
46,435

1/3 trf to Liquid Fund

2/3 continue
After 20 yrs
FV

30,957
1
34,362

1/3 trf to Liquid Fund

2/3 continue
After 21 yrs
FV

22,908
1
25,428

1/3 trf to Liquid Fund

2/3 continue
After 22 yrs
FV

16,952
1
18,817

1/3 trf to Liquid Fund

2/3 continue
After 23 yrs
FV

12,545
1
13,924

No. of yrs in
Liquid Fund
Liquid Fund
20,917

Entire amt trf to Liquid Fund

FV
5

27,338

15,478

19,175

11,454

13,450

8,476

9,434

6,272

13,924

10. Mr. Ashwin wants to

know that approximate
Total in Liquid Fund at time of Prateek's Marriage
surplus/deficit amount in
the retirement
once
Thus
Amount of corpus
SIP required
11,428
he has earmark PPF a/c
(Post retirement corpus will
be invested in debt fund).
He wants to invest the
maximum amount every
year as per current
guideline into the PPF a/c
beginning of every year and
he will renew his PPF a/c
three terms and invests
max. Amount and post
extend maturity entire fund
Current Age
34
will be invested in risk free
Retirement age
60
instruments till retirement.
Life expectancy
80
(Note: 1/4/14 onwards
rate 8.7% for entire
Current hous ehold expens es p.m
40000
lifetime)
Inflation
Debt fund
Real rate

FV of current expens es at age 60

Retirement corpus Required
PPF bal as on 31/3/2013
remaining yrs for maturity
Extens ion period
Max inves tment amount
Fv as on 31/3/2015
Fv as on 31/3/2016
Maturity amount after
completingn the total term of
investment including extension
period.
Amount reinvested in risk free
instruments for balance years
( 60 -56 )
ris k free rate
Corpus at age 60
9. You have suggested Mr.
Ashwin
toat
start
monthly
Shortfall
agea60
investment on an immediate
basis for Prateek and Aslias
higher education till age 18 of
Prateek as below in a
separate equity and balanced
fund. New investment and
portfolio rebalanced as per
below asset allocation on
specific intervals.
80:20 (E:B) for 1st five years
60:40 (E:B) for next five years
40:60 (E:B) for balance nos of
Inflation
years.
Equity
100% balanced fund post age
Balanced
of
18 of Pratik.

Amount to be accumulated

5.50%
7%
1.4218%

0.0011772

$160,925.16
$33,668,144.25
290000
7
15
150000
$478,720.00
$685,304.80

$11,688,210.79

4
6.50%
$15,036,489.88
$18,631,654.38

5.50%
11%
9%
Prateek
Age
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

0.0087346
0.0072073
Amount

$634,827.44
$446,495.30
$471,052.54
$496,960.43
$524,293.25

$4,187,367.09

Let us assume investment p.m is

Rs. 100
1s t 5 years
Ratio
Amount
Duration (months )
FV after 5 years

Equity
0.8
80
60
$6,329.24

Balanced

Next 5 years
Ratio
Amount
Duration (months )
Accumulated balance
FV after 5 years

Equity
0.6
60
60
4700.8024864427
$12,668.06

Balanced

Next 5 years
Ratio
Amount
Duration (months )
Accumulated balance
8. Ashwin wants to buy a
FV after house
5 yearstoday Rs.65L by
bigger
Total amount
afterhouse.
15 years
selling
existing
He will
pay down payment from
money
SIP perreceived
month from selling
his existing house today. He
wants to know that what
would be monthly EMI he will
have to pay ? (Note: He will go
for tenor 25 years and
proposed interest rate will be
10.75%)

Equity
0.4
40
60
8200.3043568665
$16,982.61
$40,424.68

Balanced

Cos t of current hous e

Outs tanding Principal
Net s ales cons ideration in hand
Cos t of new hous e
Loan amount
Tenure
Rate
EMI
per
month
7.
You
have
suggested
earmark the 40% and 60% of
existing share portfolio for
pratik and aslia marriage. You
have advised additional
annual investment required in
a separate Equity Index ETFs
till
their respective
marriage?
Prateek's
marriage cos
t
As lia's marriage cos t
Exis ting Equity portfolio
For Prateek
For As lia

3500000
1297000

$5,139,227.35
$6,034,693.39
632000
252800
379200

$2,787,440.35
$5,718,284.74

Shortfall
Duration
Rate
Additional investment

Prateek
$2,351,787.01
23
11%
$23,244.94

Current hous ehold expens es p.m

Inflation
Debt fund
Real rate
FV of current expenses at age 60
of ashwin
Retirement corpus for As hwin
FV of current expenses at age 80
of ashwin
Pv of corpus for sumedha when
ashwin is 80
Pv of corpus for sumedha when
ashwin is 60
Total retirement corpus

0.6
60
60
12300.4565352998
$23,442.07

2203000
6500000
4297000
25
10.75%
$41,341.12

fv of equity during aslia's

marriage

Current Age of Sumedha

Retirement age of as hwin
Age of Sumedha then
Life expectancy of as hwin
Life expectancy of s umeda

0.2
20
60
$1,505.43

0.4
40
60
3133.8683242951
$7,832.70

$10,358.44

fv of equity during prateek's

marriage

6. Ashwin wants to same life

style till his lifetime and 50%
of the percent household
expenses for sumedha after
his lifetime, compute
retirement corpus required
(Post retirement corpus will
be invested
debt
Current
Age ofinas
hwinfund)?

6,617

13,924
89,938

As lia
$316,408.65
26
$2,227.00

34
31
60
57
80
82
40000
5.50%
7%
1.4218%
$160,925.16
$33,668,144.25

$234,770.29
$13,608,545.35
$3,516,706.72
$37,184,850.97

0.0011772

As lia
Age

Amount
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Total

$745,440.64
$524,293.25
$553,129.38
$583,551.50
$615,646.83

$634,827.44
$446,495.30
$471,052.54
$1,242,401.07
$1,048,586.51
$553,129.38
$583,551.50
$615,646.83

PV as on age 18
$634,827.44
$409,628.71
$396,475.50
$959,361.58
$742,845.12
$359,496.15
$347,952.69
$336,779.90

0
1
2
3
4
5
6
7

1. To fund Roshans higher education after 4 years Gurpreet will take a loan of 50 lakhs th
in USA worth 80 lakhs now escalating @ 2.5% p.a. You advise him to invest 99 lakhs from h
instrument yielding 5% over and above the risk free return and also do a SIP in same instr
will have to do to achieve the goal ?

(Goal: Send Roshan for Higher Education abroad. The estimated outlay is Rs.1.3 crore then
Instrument- 6.5%; Inflation 5.5%)
Solution:
No. of years for goal
4
Education Goal required then
13000000
Loan
5000000
Balance to be planned for
8000000
Cost of House today
Escalation rate
FV of House required
Total amount required after 4
years
PV of Saving Account

8000000
2.50%
8,830,503

16,830,503
9900000

Investment 5% above risk-free

return
Amount of SIP

11.50%
(25,306)

2. You advise Gurpreet to save Rs.7000 every month, in Equity, Balanced and Debt funds i
investment has to be increased every two years by 20%. What would be the total amount
after 11 years? (Assumption: Equity 11%; Balanced - 9%; Debt 7%; Liquid 5.5%; Inflati
Solution:

Time frame for Geet's

Marriage is 11 years. So
investment period will also be
of 11 years

Ratio

40

No of yrs

Equity
11%

2800

75,053
3360

182,536
4032

FV after 2 yrs

FV after 4 yrs

FV after 6 yrs
2

332,979
4838.4

539,955
5806.08

820,908
6967.296

FV after 8 yrs

FV after 10 yrs

FV after 11 yrs
TOTAL Accumulation for her marriage

999,717
2,311,339

4.Gurpreets father bought a house on 1/4/1980 for Rs.5, 00,000 and did renovation expen
1/1/1981. He constructed one floor dated 5/3/1990 costed him Rs.2,00,000. Gurpreet inher
father on dated 7/5/2002 Gurpreet has received an attractive offer for a house Rs.50,00,00
Fair value of a house on 1/4/1981 was Rs.8, 00,000/, Fair value of a house on dated 7/5/20
expense will be 2% of the sales price)
Gurpreet wants to know the tax liability on assessment year 2015-16
Solution:
FVC
Less: brokerage
NVC
Less: ICOA
Less: ICOI
LTCL
Tax liability

5000000
100000
4900000
8192000
1190697.6744186
-4482697.67441861
NIL

6. Gurpreet has decided to buy a spacious ready possession 3BHK apartment in a posh loc
immediate basis. He has already received an attractive offer from a housing finance comp
interest for 1st year 10.5% loan will be sanctioned by 5/4/14 and EMI payable end of the m
Rs.20,000/ month for one term (11 months) with upward revision in rent of 10% if agreem
000, Municipal rent value: Rs.19, 000 and fair value rent: Rs.20, 500 per month, Municipal
Gurpreet wants to know that Income from from let out house Property in AY 201516
Solution:
Municipal Value
Fair Rent
Expected rent
Standard rent

228000 EMI on loan

246000
246000
216000

RLV
Actual rent p.a.
Less: Vacancy Loss
GAV
Less: Municipal taxes
NAV
Less: Deduction
Standard deduction
Interest on loan
Loss from HP

216000
240000
240000
20000
220000
20000
200000
60000
621779.1814
-481779.1814

5. Gurpreet stays in a rented apartment in Mumbai. He pays rent Rs.50,000/- per month. H
know taxable part of HRA for AY 2015-16.
Solution:
HRA received
500000
Less: lower of
Actual recievd
500000
Rent paid-10% of salary
170000
50% of salary
2150000
170000
Taxable HRA
330000

10. Gurpreet wants to take a trip abroad with his children when he attains 53 years of age
to accumulate funds for the same through investing monthly SIP 100% Equity for 5 years,
of 6th he will rebalance fund as per new asset allocation 50% E - 50% Debt fund for 3 year
beginning of 9th year, he will redeem all the corpus and invest in to risk free for balance y
the cost of trip escalates at 9%) He wants to monthly SIP required today for five years?
Solution:
Future value Cost of trip after
10years
SIP assumption to be Rs. 100
Fund value after 5 years
6-8 years
Allocation
Amt rebalanced
Fv
9 & 10th year in liquid
SIP amount required for 1st
Five years in Equity

Rs. 2,367,363.67

Rs. 7,911.55
Equity

Debt
50%
Rs. 3,955.78
Rs. 5,410.04
Rs. 11,632.65

Rs. 20,351.02

50%
Rs. 3,955.78
Rs. 4,846.00

9. Gurpreet (Case Study B): Gurpreet wants to know approx. Maturity value and return on
of an Endowment Insurance plan. Assume Company has declared reversionary bonus of Rs
Per year for first five years, Rs.60/1000 SA per year for next five years, Rs.50/1000 for the
term and also declared terminal bonus of Rs.325/1000 SA.
Solution:
Premium paid
Rs. 80,333.00
Maturity benefits
Sum assured
Rs. 2,000,000.00
Reversionary Bonus
1st 5 years
Rs. 550,000.00
next 5 years
Rs. 600,000.00
remaining 5 years
Rs. 500,000.00
Terminal Bonus
Rs. 650,000.00
Total proceeds receivable
upon maturity
Maturity Vaule
Return on investment

Rs. 4,300,000.00
Rs. 4,300,000.00
14.76%

Same as Q1 )To fund Roshans higher education after 4 years Gurpreet will take a loan of 5
then. He will also need to buy a house in USA worth 80 lakhs now escalating @ 2.5% p.a. Y
him to invest 99 lakhs from his savings account into an instrument yielding 5% over and a
risk free return and also do a SIP in same instrument. What is the additional SIP he will ha
achieve the goal ?
(Goal: Send Roshan for Higher Education abroad. The estimated outlay is Rs.1.3 crore then
years) (Assumption: Risk-free Instrument- 6.5%; Inflation 5.5%)
Solution:
Education Goal Time Frame:
Education Goal required then
Less : Loan amount

4
13000000
5000000

Balance to be planned for (A)

8000000

Cost of House today

Escalation rate
FV of House required (B)

8000000
2.50%
8,830,503

Total amount required after 4

years ( A + B )

16,830,503

PV of Saving Account (Assigned

for the higher education goal)
Investment 5% above risk-free
return

9900000
11.50%

Amount of SIP on monthly

basis

(25,306)

7. You have suggested to set aside 10% of his equity MF portfolio for the purpose of his ab
In addition, you have advised to start monthly investments today in a ratio of 50%: 50% in
fund and debt fund for seven years. At the beginning of 8th year, new investment allocatio
ratio of 30%: 70% and portfolio to be rebalanced in line with new asset allocation for balan
Calculate monthly investment required for 10 years.
Solution:
Current cost
Inflation
fv of goal (A)

1000000
5.50%
Rs. 1,708,144.46

Equity MF portfolio
10% of portfolio
fv of equity portfolio (B)

2647000
264700
Rs. 751,594.74

Shortfall ( A - B )

Rs. 956,549.72

let us assume rs. 100 is invested

Balanced

9%

0.0072073233

Debt

7%

0.0056541454

Fv after 7 years
Fv after 3 years
SIP amount required on
monthly basis

Balanced
Debt
Rs. 5,785.83
Rs. 5,577.73

Rs. 5,387.26
Rs. 12,383.11

Rs. 5,325.75

1) You have advised Mr. Gurpreet to buy an additional life insurance to replace his 70% of household e
inflation adjusted and all his liabilities in case of he dies today for the family. Calculate additional insu
required by him. (Post death corpus will be invested in Risk free instruments)
Household expenses p.m
inflation
Risk free rate
Real rate
Current age
retirement age

140000
5.50%
6.50%
0.009478673
43
60

0.0007864785

Insurance required
Existing insurance
Additional

Rs. 18,478,492.14
10000000
Rs. 8,478,492.14

loan of 50 lakhs then. He will also need to buy a house

vest 99 lakhs from his savings account into an
a SIP in same instrument. What is the additional SIP he

is Rs.1.3 crore then for 5 years) (Assumption: Risk-free

ed and Debt funds in the ratio of 40:40:20. The

e the total amount accumulated for Geets Marriage
iquid 5.5%; Inflation 5.5%)

40

20
Increase in SIP
Amount after
every 2 years

Balanced
9%

Debt
7%

2800

1400

7000

73,602
3360

36,081
1680

8400

175,770
4032

84,606
2016

10080

314,819
4838.4

148,822
2419.2

12096

501,222
5806.08

232,735
2903.04

14515.2

748,124
6967.296

341,275
3483.648

17418.24

903,084

408,537

2,311,339

d renovation expenses of Rs.1, 00,000 on dated

000. Gurpreet inherited a house on the death of his
a house Rs.50,00,000/ from a Real estate broker. (Note:
use on dated 7/5/2002 was Rs.23, 00,000 and brokerage

tment in a posh locality of his native place at chandigadh on

using finance company. (Loan amount Rs.60,00,000, Term 15 year, Fix
ayable end of the month) He will rent out a house wef 1/5/14 for
nt of 10% if agreement renews for next term. (Std. Rent value: Rs.18,
r month, Municipal tax paid in advance Rs.20, 000/ for FY1415)
in AY 201516

Rs. 66,323.94
AMRT
PM1
PM2

1
12

Total Interest for the

period

621779.2

0,000/- per month. He wants to

B.Salary + DA

ains 53 years of age. He wants

Equity for 5 years, beginning
ebt fund for 3 years and
k free for balance years. (Note:
y for five years?

4300000

alue and return on investment

sionary bonus of Rs.55/1000 SA
Rs.50/1000 for the remaining

will take a loan of 50 lakhs

ating @ 2.5% p.a. You advise
ding 5% over and above the
tional SIP he will have to do to

is Rs.1.3 crore then for 5

he purpose of his abroad trip.

atio of 50%: 50% in balanced
nvestment allocation will be in
allocation for balance term.

In our calculator we
will consider C/Y =1.
So No need to
consider this steps
total
Rs. 11,173.09
Rs. 17,960.84

is 70% of household expenses

culate additional insurance

If Sahanubhuti dies today what insurance she needs to have if she wants that Shambha
her marriage and also her boarding school expenses plus her marriage expenses in toda
are invested in a Debt Fund.
Solution:
Current Monthly household exp
50% for Shambhavi
Present Age of Shambhavi
Marriage Age of Shambhavi
Debt Fund Rate
Inflation Rate
Real Rate
PV reqd for this exp (A)

40000
20000
12
25
7%
5.50%
1.42%
2,852,107

Boarding School Exp

Escalation of Education Cost

PV of Boarding expense (B)

7%
10.00%
-2.73%

10%

Outlay in Present Cost

180000
180000
180000
180000
180000
180000

1,158,591

Marriage Expense
Escalation of Marriage Cost

Outlay in Present Cost

7%
1500000

PV of Marriage Cost ( C)

1,500,000

Total Insurance Required (A +

B + C)

5,510,698

Sahanubhuti wants to invest till the marriage of Sambhavi immediately monthly basis i
of Gold ETF 40%, Equity -40%, Debt-20%. She wants to know How much SIP is required?
Solution:
Present Age of Shambhavi
12
Marriage Age of Shambhavi
25
No. of yrs for investment
13
Marriage Expense
Escalation of Marriage Cost
Outlay in Present Cost
no. of yrs
FV of Exp

7%
1500000
13
3,614,768

Asset
Rate(P.a)
Gold ETF
Equity
Debt
Let us assume he is investing Rs. 100 p.m
Asset
ratio
Gold ETF
Equity
Debt

Rate (P.m)
7.50%
11%
7%

0.006044919
0.0087345938
0.0056541454
Investment Amount

40%
40%
20%

40
40
20
Total

So amount of SIP is

Rs. 12,585.23

Sahanubhuti wants to know Corpus available for marriage of sambhavi if she invests Rs
per month in below asset allocation till her marriage. (Equity MF 40%, Balance MF-40%,
20% and she will increase her monthly investment by 20% every two year.
Solution:
Present Age of Shambhavi
Marriage Age of Shambhavi
No. of yrs for investment
Asset
Balanced Mf
Equity
Debt
Investment amount
for 1st 2 years, remaining 11
Asset
Equity
Balanced
Debt

12
25
13
Rate(P.a)
9.00%
11%
7%
7000

ratio

Investment amount
for next 2 years, remaining 9
Asset
Equity
Balanced
Debt

0.0072073233
0.0087345938
0.0056541454

Investment Amount for 2

years
40%
2800
40%
2800
20%
1400
8400

ratio

Investment amount
for next 2 years, remaining 9
Asset
Equity
Balanced

Rate (P.m)

Investment Amount for 2

years
40%
3360
40%
3360
20%
1680
10080

ratio

Investment Amount for 2

years
40%
4032
40%
4032

Debt

20%

Investment amount
for next 2 years, remaining 7
Asset
Equity
Balanced
Debt

12096

ratio

Investment amount
for next 2 years, remaining 5
Asset
Equity
Balanced
Debt

ratio

ratio

Investment Amount for 2

years
40%
6967.296
40%
6967.296
20%
3483.648
20901.888

ratio

Investment amount
for next 1 year, remaining 0
Asset
Equity
Balanced
Debt

Investment Amount for 2

years
40%
5806.08
40%
5806.08
20%
2903.04
17418.24

Investment amount
for next 2 years, remaining 1
Asset
Equity
Balanced
Debt

Investment Amount for 2

years
40%
4838.4
40%
4838.4
20%
2419.2
14515.2

Investment amount
for next 2 years, remaining 3
Asset
Equity
Balanced
Debt

2016

Investment Amount for 2

years
40%
8360.7552
40%
8360.7552
20%
4180.3776
25082.2656

ratio

Investment Amount for 1

year
40%
10032.90624
40%
10032.90624
20%
5016.45312
Total

The Money back policy gives back 15% of the sum assured at the end of 3rd, 6th
and 12th year and 40 % on maturity. A revisionary bonus of Rs. 35/1000 SA per
and a final bonus of 10% of SA are announced by the company, Sahanubhuti wou
to know that if she buys standalone term insurance paying a premium of Rs. 45
thousand, what is Investment return produced by the above money back policy.
Solution:
Premium of money back policy
Premium of term policy
Differenial Premium
On maturity
Term Policy Benefits
Money back Policy
Sum assured's 40%
Reversionary bonus
Terminal Bonus
Total
Return on invetment

45565
22500
23065

0
200000
262500
50000
512500
4.770%

In addition to her retirement corpus as per her goal, Sahanubhuti would also like
provide for Rs. 10 lakhs for charity at her age of 70 years, another Rs. 10 lakhs a
age of 80 years and posthumously another Rs. 10 lakhs. Calculate the revised c
needed. Post retirement investments are done in debt instruments?

Solution:
Retirement age
post retirement life
Current month exps
current age
Inflation
Debt return
Real rate of return
exps in the first yr of retirement
Retirment corpus of exps and
estate

60
25
60000
34
5.50%
7.00%
1.42%
Rs. 241,387.74
Rs. 61,052,336.54

Corpus for charity at 70 (Find PV at

age 60)

Rs. 868,334.03

Corpus for charity or other goal at

80 (Find PV at age 60)

Rs. 754,003.98

Corpus for estate goal

(posthumously) at 85 (Find PV at
age 60)
Hence retirement corpus

Rs. 184,249.18
Rs. 62,858,923.72

0.0011771825

nts that Shambhavi should get 50% of monthly expenses till

e expenses in todays term. Assume that the claim proceeds

no. of yrs
0
1
2
3
4
5

no. of yrs

y monthly basis in ratio

h SIP is required?

FV of expense
180,000
198,000
217,800
239,580
263,538
289,892

PV of Expense
180,000
185,047
190,235
195,569
201,052
206,689

FV of Exp
PV of Exp
13
3,614,768
1,500,000

FV
Rs. 10,387.87
Rs. 13,319.29
Rs. 5,015.14
Rs. 28,722.30

i if she invests Rs.7000/Balance MF-40%, Debtear.

FV after 2 years
Rs. 75,052.88
Rs. 73,602.35
Rs. 36,080.96

FV after 2 years
Rs. 182,536.11
Rs. 180,748.92
Rs. 89,487.08

FV after 2 years
Rs. 332,978.90
Rs. 330,776.89

Rs. 164,295.11

FV after 2 years
Rs. 539,954.68
Rs. 537,241.59
Rs. 267,273.69

FV after 2 years
Rs. 820,907.81
Rs. 817,565.01
Rs. 407,122.74

FV after 2 years
Rs. 1,198,196.10
Rs. 1,194,077.44
Rs. 594,993.73

FV after 2 years
Rs. 1,700,404.12
Rs. 1,695,329.52
Rs. 845,145.12

FV after 1 year
Rs. 2,014,902.63
Rs. 2,009,269.82
Rs. 1,001,838.11
Rs. 5,026,010.55

e end of 3rd, 6th, 9th

35/1000 SA per year
ahanubhuti would like
mium of Rs. 45 per
ney back policy. (IRR)?

ti would also like to

er Rs. 10 lakhs at the
te the revised corpus
nts?

What insurance cover should Neelam have so that her family receives her share of contrib
which is Rs.15,000/- p.m. till Varun completes 28 years. Assume that the claim proceeds a
Solution:
Monthly expense
15000
Varun's Present Age
16
Till Varun's Age
28
Debt Fund
7%
Inflation Rate
5.50%
Real Rate
1.42%
PV of Insurance Reqd
1,988,111

2. Calculate the SIP for retirement corpus of Mahesh. Invest equally in Equity and Debt and re-balance
from Maheshs retirement age till Neelams life expectancy. Post retirement investment in risk-free ins
Solution:
Current Monthly expense
40000
75% in Post retirement period
30000
Present Age of Mahesh
45
Retirement Age
60
Mahesh's Age when considering
Neelam's life expectancy (78-60)
Inflation Rate
Equity Rate
Debt Rate
Risk-free rate
FV of present expenses
Real Rate Post retirement
PV of Corpus Required

18
5.50%
11%
7%
6.50%
66,974
0.95%
13,310,058

SIP Investment assumed

100
Equity
50
5
3,956

Debt
50
5
3,580

Rebalancing Equally
no of yrs
FV

3,768
5
10,305

3,768
5
8,865

Rebalancing Equally

9,585

9,585

Equally in Equity:Debt
no of yrs
FV

no of yrs
FV

5
20,107

After 15 yrs amount accumulated

37,129

SIP Amount per month

35,848

5
17,023

Mahesh and Neelam Desai has a Joint Housing Loan. Today they are ready to pay Rs.2 lakh
the loan within 5 years. Kindly re-schedule and calculate the revised EMI?
Solution:
Loan taken by each
Term in yrs
Interest on loan p.a.
Present EMI

1500000
15
10.25%
16,349

Principal Outstanding after

Term in months
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

84

EMI's

Loan Principal
1500000
1,496,463
1,492,896
1,489,299
1,485,671
1,482,011
1,478,321
1,474,599
1,470,845
1,467,060
1,463,241
1,459,391
1,455,507
1,451,590
1,447,640
1,443,656
1,439,638
1,435,586
1,431,499
1,427,377
1,423,220
1,419,027
1,414,799
1,410,534
1,406,233
1,401,896

Int
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%

27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71

1,397,521
1,393,109
1,388,659
1,384,171
1,379,645
1,375,080
1,370,476
1,365,833
1,361,150
1,356,428
1,351,665
1,346,861
1,342,016
1,337,130
1,332,202
1,327,232
1,322,219
1,317,164
1,312,066
1,306,923
1,301,738
1,296,507
1,291,232
1,285,912
1,280,547
1,275,136
1,269,678
1,264,174
1,258,623
1,253,024
1,247,378
1,241,684
1,235,940
1,230,148
1,224,306
1,218,415
1,212,473
1,206,480
1,200,436
1,194,340
1,188,193
1,181,993
1,175,740
1,169,433
1,163,073

10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%

72
73
74
75
76
77
78
79
80
81
82
83
84
Outstanding Principal
Immediate Repayment
Balance Outstanding
New Loan term in yrs
Interest Rate
New EMI for each

1,156,658
1,150,189
1,143,664
1,137,083
1,130,447
1,123,753
1,117,003
1,110,195
1,103,328
1,096,403
1,089,419
1,082,375
1,075,271
1,068,107
200000
868,107
5
10.25%
18,552

10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%

Mahesh wants to know that approximate Life Insurance covers he needs in case of he dies
wants that his family should receive 90% of present household expense inflation adjusted
for the remaining expected life of neelam. Assume life insurance claim proceeds are inves
in debt instruments.
Solution:
Debt return
Inflation
Real rate
life insurance required

7.00%
5.50%
1.422%
$12,199,506.26

0.0056541454
0.0044716989
0.0011771825

Mahesh wants to build a retirement corpus for inflation-adjusted expenses in their post-re
75% of pre-retirement monthly household expenses, retirement to be considered on Mahe
years.Calculate retirement corpus required. (Note: Post retirement corpus will be invested
instruments and monthly household expenses are expected to increase @ 7% per year)
Solution:
Pre retirement inflation
fv of exps at retirement

5.50%
$66,974.29

Post retirement inflation

risk free rate
Real rate
corpus

7.00%
6.50%
0.469%
$16,847,798.05

0.000390397

receives her share of contribution of monthly expenses

me that the claim proceeds are invested in a Debt Fund.

Equity and Debt and re-balance every 5 years. Retirement period

ement investment in risk-free instrument.

Total
100
7,536

19,169

37,129

ey are ready to pay Rs.2 lakhs each. They want to prepay

revised EMI?

EMI
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349

Interest
12,813
12,782
12,752
12,721
12,690
12,659
12,627
12,596
12,563
12,531
12,499
12,466
12,432
12,399
12,365
12,331
12,297
12,262
12,227
12,192
12,157
12,121
12,085
12,048
12,012
11,975

Principal
3,537
3,567
3,597
3,628
3,659
3,690
3,722
3,754
3,786
3,818
3,851
3,884
3,917
3,950
3,984
4,018
4,052
4,087
4,122
4,157
4,193
4,228
4,265
4,301
4,338
4,375

16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349

11,937
11,899
11,861
11,823
11,784
11,745
11,706
11,666
11,626
11,586
11,545
11,504
11,463
11,421
11,379
11,337
11,294
11,251
11,207
11,163
11,119
11,074
11,029
10,984
10,938
10,892
10,845
10,798
10,751
10,703
10,655
10,606
10,557
10,508
10,458
10,407
10,357
10,305
10,254
10,202
10,149
10,096
10,043
9,989
9,935

4,412
4,450
4,488
4,526
4,565
4,604
4,643
4,683
4,723
4,763
4,804
4,845
4,886
4,928
4,970
5,012
5,055
5,098
5,142
5,186
5,230
5,275
5,320
5,365
5,411
5,457
5,504
5,551
5,599
5,646
5,695
5,743
5,792
5,842
5,892
5,942
5,993
6,044
6,096
6,148
6,200
6,253
6,306
6,360
6,415

16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349
16,349

9,880
9,825
9,769
9,713
9,656
9,599
9,541
9,483
9,424
9,365
9,305
9,245
9,185

s he needs in case of he dies today. He

d expense inflation adjusted every month
nce claim proceeds are invested by neelam

ted expenses in their post-retirement period

nt to be considered on Maheshs age of 60
ement corpus will be invested in risk free
o increase @ 7% per year)

6,469
6,525
6,580
6,637
6,693
6,751
6,808
6,866
6,925
6,984
7,044
7,104
7,165