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a three years
ago and a personal loan of rs 3 lakh @ 18 p.a a year ago. There are 2 more years remaining in the tenure of both
the loans. She gets a wind fall of rs 6 lakh . She ask you whether to invest this in bank Fd @ 9% p.a for 2 years .
You advice her to repay both loans and invest the amount of EMI’s systematically every month in tax efficient
market oriented security. You estimate in a return band of 8-10% her revised net worth with lower tax incidence
after 2 yrs . If she adheres to your advices her net worth may rise b/w
A. 73000 to 91000
B. 32000 to 46000
C. 28000 to 41000
D. 37000 to 52000
Tenure Yrs 5 3
PV now 3,78,038 2,17,244 Total Loan Balance 5,95,282 Will be closed now
Difference between the FV through SIPs and FD FV will be 740735-712860 = 28875 or 754272-712860=41412
Rajesh, aged 35 years, wishes to retire at 60. If his present monthly expenses are Rs. 50,000 and life expectancy
is 75 years, calculate the additional corpus required in case he lives longer by 10 years than his life expectancy.
1ST
2-find RRR=8-7.5/1.075=0.46512
2ST HERE HIS LIFE EXPn increase by 10yrs after 75 age it means that he lives at age of 85
2-find RRR=8-7.5/1.075=0.46512
As you suggested here are the questions I faced in yesterday’s RAIP paper
Four questions (exactly same) given below which have appeared in your blog were asked
Fire in mall,
Bungalow damage
I therefore thank you for your blog which helped to prepare for exam.
Four questions were very similar from sample papers although slightly tweaked.
Air condition insurance on replacement basis with (WDV instead SLM) method,
Around 5 – 6 questions on insurance policy calculation. All the questions were tweaked and far different from
sample papers.
One of SV,
One on comparing returns of money back policy paid up value with 8% return
The additional questions which did not appeared in your blog were as below
Pardon me for not remembering the exact answers and the wording and figures in the questions, but I tried to
1) Ramesh to car loan of Rs 8 Lakhs and personal loan of Rs 3 lakh. The rate of interest is 12 % and 18 % with
monthly reducing basis. He made windfall gain of Rs 6 Lakhs in 2013. His financial advisor advised him to repay
these loans and invest the monthly installment in Bank deposits with interest rate between ranges of 8 – 10 %. He
has two more years to repay these loans. Do you think the advice given to him is correct?
Ans:
– Yes, as his net worth will increase between Rs xxxxxx to Rs xxxxxx (I don’t remember the no)
2) Tow companies A and B purchase land in 2006. Company A completed construction in 2007 for Rs 70 lakhs and
started manufacturing plant in 2008 for Rs 1.5 cr. Company B completed the construction in 2009 for Rs 90 lakhs
and started manufacturing plant in 2009 for Rs 2 cr. Company A provides depreciation @ 10% on SLM method
whereas Company B provides depreciation on WDV method. What addition reserves Company A need to provide on
3) Ashok, a doctor by profession of age 33 years and have productive practice till age 62. His annual income is Rs
40 lakhs and monthly expenses are Rs 60000 of which he accounts for 15%. He has 2 daughter age 6 and 12. He
wishes to provide fund of Rs 20 lakhs for each in today terms their education when they are 18 years old. He has
already made provision of Rs 27 lakhs towards this. He has insurance policy of Rs 15 lakhs. He wish to make
provision of his next 5 years and for non-working wife for next 40 years. How much insurance he should take now.
4) Mahesh, a lawyer by profession is 38 years old. He has three polices of Rs 20 lakh, RS 20 Lakhs and Rs 15
Lakhs money back with survival benefit of 15 % every 5 years of which 1 benefit is received. All these policies are
maturing at his age of 60. He has a 2 daughter age 10 and 12 years. His annual earning are Rs 30 Lakhs. He wish
to make provision of Rs 20 lakhs in today’s cost for each for their marriage when they will be 21 years. His monthly
expense is Rs 50000 of which he accounts for 25 %. Calculate the insurance he need considering his tenure for
next 10 years and for the expenses for his non-working wife for next 30 years.
5) Two different policies one with money back and other endowment were asked to compare with respect to cover
and returns and was asked to suggest which is more suitable for a man age 32 with monthly expense of Rs 35000
( policy holder account for 20%) and non-working wife for her expenses for 30 years.
Regret I do not remember the figures in questions and answer options as Time was out for me.
5) Vinita was recently divorced and has two children. The divorce decree requires that
she pay 1/3 of the college tuition cost for her children. The tuition cost is currently Rs.
15,000 per year and has been increasing at 7% per year. Her son and daughter are 12 and
16 respectively and will attend college for four years beginning at age 18. How much
should she save each month, beginning today for the next five years to finance education
for both the children (in nearest rupee)? Assume that her after-tax rate of return will be
9% and that general inflation has been 4% p.a.
A) Rs. 750
B) Rs. 745
C) Rs. 2,235
D) Rs. 2,500
Solution: Step 1) Tuition Cost for each child for Vinita = Rs 5000.
Calculate the Inflation adjusted present value of tuition expenses for both children using
Cash Mode: Inflation adjusted = ((1.9/1.07)-1)*100 = 1.869
D.Editor x-
1: 0, 2: 0, 3: 5000, 4: 5000, 5: 5000, 6: 5000, 7: 5000, 8: 5000, 9: 5000, 10: 5000.
NPV = 36158.96027 because son 6 year collage will begin age 18 for four year so 6+4=10 for son +four year
Step 2) so the present value of the education cost is 36158.96. The sum of money needed
to be invested monthly in begin mode until the youngest child is out of school:
Begin Mode: PV = 36158.96027, I = 9/12, N = 5*12,
PMT = -745
1.
Suryakant has an accident insurance policy which pays Temporary Partial Disability (TPD) benefit of Rs. 3,000 per
week, for upto 104 weeks. He meets with an accident and is disabled and bedridden for 6 months. He has available
leave of 4 weeks, after which he is on loss of pay. What benefit amount will he get from the insurance company? –
Marks : 4
(b)Rs. 72,000
(d)Rs. 78,000
2.
(a) the authority of brokers to accept risks within certain limits and term as set out by the Insurers
3.
A Life insurer receives an application for Rs. 20 crores. However the insurer is not ready to take this risk, but
simultaneously does not want to leave the business. The insurer company shops around and contracts another
insurer to assume a certain percentage of loss for a corresponding percentage of premiums. This is a case of
_____________. – Marks : 2
(a) Facultative reinsurance
(b)Treaty reinsurance
4.
Reliable age proof must be given along with the proposal form of life insurance which could be a : (A) Certified
copy of birth certificate of Municipal Corporation (B) Marriage certificate issued by Marriage Registrar (C) Registerd
(a) (A)
(b)(B)
5.
Mr. Singh bought a Rs. 10 lakh term life Insurance Plan on 10 Aug 2006 by payment of Regular premium of
Rs.3,200 for 15 years. On July 15 2008 Mr. Singh committed suicide. What is the benefit amount payable to Mr.
(b)NIL
(d)Rs. 10,00,000
6.
(A) In level term insurance policies, the coverage remains constant throughout the term. (B) The premium payable
in level term insurance policies can remain same or increase with change in working conditions of Insured. – Marks
:2
(a) Both (A) & (B) are incorrect
(d)(A), is correct
7.
Any possible occurrence which may have a negative financial implication can be plotted on a graph with X axis
measuring the frequency (low-high) and Y axis measuring the financial impact (low-high). It would not be practical
to purchase insurance for events which would fall in the high frequency, high impact quadrant because _________.
– Marks : 2
(a) the best way to cover such a risk would be to alter the functioning of the business
(d)such occurrences are so few that no insurer would be offering a risk cover
8.
A type of risk with high frequency but low severity is probably best handled by: – Marks : 1
(a) Transfer.
(b)Coinsurance.
(c) Reinsurance.
(d)Self Insurance.
9.
10.
(a) insured gets compensation to the extent he has insured, irrespective of amount of loss
11.
(a) A bulk of the premium is invested and a small portion is used to provide life cover.
(b)An Endowment Policy provides larger life cover than a Whole Life Policy, at lower premium due to its cash value.
(c) An Endowment Policy is similar to PPF in terms of returns but gives extra benefit of insurance cover.
(d)An Endowment Policy is usually less expensive than a Whole Life Policy due to the fixed nature of the term
12.
Whole life insurance contracts contain cash surrender values. These cash surrender values: – Marks : 1
(b)Are based on the past experience of the insurance company and cannot be guaranteed.
(c) Represent an excess of the premiums collected over pure insurance costs and earnings credited.
(d)Are available only if the insurer chooses to terminate the coverage under the policy.
13.
In case of a life insurance policy, if the gross annual premium amount does not exceed the sum assured by 20%,
then _______. (A) Death benefit is tax free. (B) Death benefit is taxable. (C) Maturity benefit is tax free. – Marks :
14.
Which of the following statements is/are NOT true about a warranty in an insurance contract? (A) Declarations on
the proposal form can be warranties by reference. (B) Warranties help the insurer to ensure that the risk stays the
same during currency of the policy. (C) Warranties have to be followed literally. – Marks : 1
(b)(B)
(c) (A)
15.
Which of the following statements is/are correct? (A) Limits for transacting life insurance in rural sector are laid
down in number of lives insured. (B) Limits for transacting life insurance in social sector are laid down in number of
(b)(B), is correct
16.
Adverse selection refers to an Insurance Company________. – Marks : 1
(b)Insuring a person in the high risk category without loading his premium
(c) Insuring a person susceptible to genetic diseases but at a substantially higher premium
(d)Insuring a person whose risk profile is low, hence compelling the company to offer him a discount in premium.
A firm needs to borrow funds on a short term basis without reducing its current ratio below 1.25. The firms’ current
assets and current liabilities are Rs.1,600 and Rs.1,000 respectively. What amount can the fund borrow? – Marks :
2.
Ajay has a net worth of Rs. 2,00,000 at the beginning of the Financial Year 2006-2007. The following transactions
occurred during the Financial Year 2006-2007 with respect to his account. 1. Paid off credit card liability worth Rs.
10,000 using savings account 2. Transferred Rs. 4,000 from savings account to PPF account 3.Purchased Rs. 2,000
of furniture with credit. What is the net worth of Ajay after these transactions? – Marks : 4
(b)Rs. 1,84,000.
(d)Rs. 2,00,000
3.
” Member should act with care and skill in providing Financial Planning Services”. This Forms part of ________ in
(a) Fairness
(b)Diligence
(c) Integrity
(d)Competence
4.
Divya, a CFP certificant, recently took Ajay as a client. After receiving an excessive number of questions from Ajay
regarding his plan, Divya became desperate and changed her business phone number to an unlisted number. She
notified Ajay that he could not have her new phone number, and that he must communicate with her via e-mail or
fax. Which principle, if any, embodies Rules that require Divya to provide Ajay with her new number? – Marks : 2
(a) Integrity.
(b)Fairness.
(c) Objectivity.
(d)Professionalism.
5.
6.
(b)English mortgage
(d)simple mortgage
7.
While making an investment in a Debt fund for your client you make the following remarks: (A) Rate of return by
the instrument in the past is 8.5% and is expected to continue in future. (B) The investment would have low risk.
In view of the CFP code of Ethics, which of the above statement is voilative?-Marks : 2
(b)(B), Only
8.
(A) In India, only the lessor is allowed to charge depreciation on the assets and claim tax deductions. (B) In India,
only the lessee is allowed to charge depreciation on the assets and claim tax deductions. – Marks : 1
9.
Which of the following is a reasonable assumption to make about the understanding of a client on the Financial
10.
While presenting and reviewing a Financial Plan to the client, you would do all of the following except ______. –
Marks : 1
11.
12.
A Financial Planner identifies and distinguishes between the needs and wants of the client. Priority should be given
to __________. – Marks : 1
(c) Needs
(d)Wants
13.
Suresh, a Certified Financial Planner, is preparing a letter to circulate among prospective clients and the letter
contains information on services provided by his firm. According to the Code of Ethics and Rules of Professional
Conduct, all of the following information should appear in the letter except ________. -Marks: 1
(d)identity of the firm providing the service and the nature of services offered
14.
Deficit financing provision in the Budget will lead to the following/s: (A) Increase in money supply and rise in prices
of goods and services in market(B) Fall in national income and Increase in GDP. – Marks : 1
A client has the need to provide for the cost of his child’s college education. He envisages that four annual
payments of Rs. 20,000, in current money terms, would be needed beginning 15 years from now. Assuming level
of inflation at 5% per annum and that the fund earns 8% per annum returns throughout, calculate the present
value to be placed on this liability when carrying out a needs analysis for this client. (Round of your answer to the
(b)Rs. 49000
(d)Rs. 23,000