018 Oct 09 Kartik1

FPSBI/M-VI/10-01/09/WN-18
Solution: Kartik Gupta

1)
B)
2)
A)
Balanced MF Balance
125000 120000+5000
Rs. 5,000 was invested on 1st Oct 2009 at the day end NAV. Hence, Rs. 1.2 lakh is the
current market value of investment excluding investment of Rs. 5,000 on 1st Oct 2009.
Balanced MF Returns
Monthly effective rate
Balance on 31st Mar-2013
Monthly investments of Rs. 5000 grow to
This balance grows to
Yearly Inflation
Monthly Inflation
11.00% p.a.
0.87346% p.m.
427492 FV(0.8735%,36+6,-5000,-120000,1)
7538930
7538930 at the age of 60 years
FV(11%,60-32.5,0,-427492,1) (27 years & 6 months)
6.50% p.a.
0.52617% p.m.
Expenditure in the first month after retirement

Total Corpus needed at retirement
The balance amount which has to be made up by way of SIP from his salary
This amount will grow @11% p.a. in Balanced MF for a period of 5 years after age 55 years
Therefore, Balance till age 55
The amount of required SIP is
3)
B)
Interest
2006-07
34000
2007-08
51000
Total
85000
i)
Interest for the previous year 2009-10
ii)
Interest for the preconstruction period i.e. from 1st Aug 2006 to 31-032008 (1/5th of 85000)
Total amount of interest allowable as deducation u/s 24
1
2
3
4
50542
5
17000
6
7
67542
8
9
10
11
12
Total Interest
FPSB India/Public
OCT-2009
61990 FV(6.5%,31,0,-11000,0)*0.8
8327077 PV(((1+0.8735%)/(1+0.52617%))-1,15*12,-61990,0,1)
788146 8327077-7538930
467727 PV(11%,5,0,-788146,0)
428 PMT(0.8735%,(55-32.5)*12,0,-467727,1)
1-May-08
1-Jun-08
1-Jul-08
1-Aug-08
1-Sep-08
1-Oct-08
1-Nov-08
1-Dec-08
1-Jan-09
1-Feb-09
1-Mar-09
1-Apr-09
Interest paid
4250
4243
4236
4230
4223
4216
4209
4202
4194
4187
4180
4173
50542
IPMT(8.5%/12,1,20*12,-600000,0,0)
IPMT(8.5%/12,2,20*12,-600000,0,0)
IPMT(8.5%/12,3,20*12,-600000,0,0)
IPMT(8.5%/12,4,20*12,-600000,0,0)
IPMT(8.5%/12,5,20*12,-600000,0,0)
IPMT(8.5%/12,6,20*12,-600000,0,0)
IPMT(8.5%/12,7,20*12,-600000,0,0)
IPMT(8.5%/12,8,20*12,-600000,0,0)
IPMT(8.5%/12,9,20*12,-600000,0,0)
IPMT(8.5%/12,10,20*12,-600000,0,0)
IPMT(8.5%/12,11,20*12,-600000,0,0)
IPMT(8.5%/12,12,20*12,-600000,0,0)
4)
D)
5)
A)
6)
A)
U/s 94(7) of Income Tax Act, all the three conditions mentioned below are satisfied.
i) He has bought the units within a period of three months prior to the record date
ii) He has sold the units within a period of 9 months after the record date
iii) The dividend on such units received by him is exempted from tax
The transactions of Kartik are as following
2-Apr-2009
cost of 1000 units bought @ Rs. 50 per unit
50000
15-Jun-2009
Record Date
5-Mar-2009
sold 1000 units @Rs. 46 per unit
46000
capital loss
4000
This loss cannot be claimed as short term loss for Tax computation as the dividend of Rs. 10,000 received is tax exempt
Present Value of edcation and Marriage

expences @11% p.a.
Amount of Monthly investments
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
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
776664
827147
880911
1876341
1998303
0
0
0
7712249
250000*(1.065)^18
250000*(1.065)^19
250000*(1.065)^20
500000*(1.065)^21
500000*(1.065)^22
1500000*(1.065)^26
1264094 NPV
12,496 PMT((1.11)^(1/12)-1,20*12,-1264094,0,1)
FPSB India/Public
OCT-2009
7)
C)
8)
D)
Income needed
Inflation Rate
Debt Returns
Inflation adjusted returns
present age of Abhilasha
expected life of abhilasha
Life insurance needed
9)
B)
Mutual
Fund
A
B
C
D
10)
A)
11)
B)
12)
A)
13)
A)
14)
C)
15)
A)
400000
6.50%
9%
2.3474%
28
80
12221470
C, A, D & B
Average Return in Portfolio
long term
Beta
18%
1.30
14%
0.85
16%
1.02
17%
1.20
12-Oct-2006
8-Dec-2007
19-Nov-2008
2-Oct-2009
(1+9%)/(1+6.5%)-1
years
years
PV(2.3474%,80-28,-400000,0,1)
Risk Free
Market Returns
Jensens Alpha
Ranking
6.50%
6.50%
6.50%
6.50%
15%
15%
15%
15%
0.45%
0.28%
0.83%
0.30%
2
4
1
3
-6.50
0.30
0.50
9.50
17.40% XIRR
FPSB India/Public
OCT-2009
18%-(6.5%+(1.3*(15%-6.5%)))
14%-(6.5%+(0.85*(15%-6.5%)))
16%-(6.5%+(1.02*(15%-6.5%)))
17%-(6.5%+(1.2*(15%-6.5%)))
Solutions : Chandrika Raj

16)
C)
Tenure of the loan installments
180 months from 1st January, 2004 to 1st December, 2018
No. of installments paid till 1st October, 2009
70
No. of installments outstanding after 1st
Oct.'09
110 180-70
Outstanding amount as on 1st October, 2009

2,347,000
This outstanding amount is the Present Value of 110 future EMIs @ 9% p.a. compounded monthly
Existing EMI
31,410 PMT(9%/12, 110, -2347000,0,0)
The outstanding amount of Rs. 23.47 lakh is to be repaid from 1st Nov.'09 to 1st Dec.'12
No. of months (revised tenure of
installments)
38
Revised installment
71,212 PMT(9%/12,38,-2347000,0,0)
Increase in EMI
39,802 71212-31410
17)
B)
Market Value of Gold coins/bars
Cost of Gold coins/bars (year 2006-2007)
cost inflation index
2006-2007
cost inflation index
2009-2010
Inflated cost of Gold coins/bars
Long-Term Capital Gains
(X)
Long-Term Capital Gains Tax @ 20%
Cost of Acquisition of Income Fund units
(2006-07)
Current Value of units
Long-Term Capital Gains
Long-Term Capital Gains Tax @ 10% (Y)
Inflated cost of acquisition
Long-Term Capital Gains (Z)
Long-Term Capital Gains Tax
Long Term Capital Gains
(X + Z)
400,000
325,000
519
632
395,761 325000*632/519
4,239 400000-395761
848 4239*0.2
188,738 11254.512*16.77
209,000
20,262 209000-188738
2,026
229,831
-20,831
Nil
-16,593
24,501 4239+20262
20262*0.1
188738*632/519
209000-229831
4239-20831
FPSB India/Public
OCT-2009
18)
A)
Funds required for Rajdeep on 1st January,
2016
2,837,038 (2000000)*1.06^6
Funds required for Sujoy on 1st January,
2018
3,187,696 (2000000)*1.06^8
Rs. 15,000 per month is invested since 1st Jan-2010 in Equity Growth Fund scheme yielding 13% p.a.
13% p.a. effective =
1.02368% p.m. effective
(1.13)^(1/12)-1
Estimated accumulated corpus in equity growth
fund from 1st Jan-2010 to 1st Jan-2013
655,618 FV(1.02368%,36,-15000,0,1)
Rs. 65,000 per month additional is invested since 1st Jan-2013 until 1st Dec-2015 in the same Equity Growth Fund scheme.
Estimated accumulated corpus in equity growth
fund as on 1st Jan-2016
4,442,621 FV(1.02368%,36,-80000,-655618,1)
Remaining Corpus after redemption on 1st
Jan-2016
1,605,583 4442621-2837038
Accumulated amount in equity growth fund
scheme on 1st Jul-2016
Redeemed on 1st Jul-2016 and invested in
MMMF
Remaining corpus in Equity Gr. Fund on 1st
Jul-2016
Redeemed on 1st Jan-2017 and invested in

MMMF
Redeemed on 1st Jul-2017 and invested in
MMMF
Jul-2017
Total corpus accumulated for Sujoy on 1st Jan2018
Shortfall in corpus for Sujoy
1,706,757 1605583*(1.13)^(1/2)-1
426,689 1706757/4
1,280,068 1706757-426689
340,182 1360730/4
1,020,547 1360730-340182

scheme on 1st Jan-2017
Accumulated amount in MMMF scheme on
1st Jan-2017
scheme on 1st Jul-2017
1st Jul-2017
271,214 1084856/4
813,642 1084856-271214

scheme on 1st Jan-2018
1st Jan-2018
1,976,053 864912+1111141
1,211,643 3187696-1976053
FPSB India/Public
OCT-2009
1,360,730 1280068*(1.13)^(1/2)-1
440,337 426689*(1.065)^(1/2)-1
1,084,856 1020547*(1.13)^(1/2)-1
805,486 (340182+440337)*(1.06
5)^(1/2)-1
864,912 813642*(1.13)^(1/2)-1
1,111,141 (271214+805486)*(1.06
5)^(1/2)-1
19)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
20)
B)
Chandrika completes 60 years in the year 2031, she has to get the retirement corpus ready by 31st December-2031.
Accumulated value of units in Balanced Mutual Fund scheme
10.5% p.a. effective =
0.83552% per month effective
Investment per month 2010
5,000
Accumulated value end of 2010
63,360
5,500 5000*1.1
139,710
6,050 5500*1.1
231,045
6,655 6050*1.1
339,638
7,321 6655*1.1
468,066
8,053 7321*1.1
619,256
8,858 8053*1.1
796,524
9,744 8858*1.1
1,003,631
10,718 9744*1.1
1,244,831
11,790 10718*1.1
1,524,939
12,969 11790*1.1
1,849,398
14,266 12969*1.1
2,224,360
15,692 14266*1.1
2,656,770
17,261 15692*1.1
3,154,468
18,987 17261*1.1
3,726,299
20,886 18987*1.1
4,382,232
22,975 20886*1.1
5,133,506
25,272 22975*1.1
5,992,778
27,800 15272*1.1
6,974,298
30,580 27800*1.1
8,094,107
33,637 30580*1.1
9,370,245
37,001 33637*1.1
10,823,004
B)
Principal outstanding pursuant to last interest due date (1st Oct2009)
5% repayment of original principal amount of loan to be paid on
1st Jan 2010
Loan outstanding on 1st Jan-2010 after payment
Amount of interest due on 1st Apr-2010
2nd Repayment due on 1st Apr-2010
Additional 5% of original principal to be repaid
Total obligations targeted for 1st Apr-2010
Current market value of Equity Growth Fund scheme
ETF on Nifty - current market value
Portfolio of equity shares
Total current market value
Absolute growth required in the next 5 months
3,743,000
285,000
3,458,000
92,934
1,900,000
285,000
2,277,934
387,000
753,000
984,000
2,124,000
7.25%
5700000*5/100
3743000-285000
3458000*0.1075*3/12
5700000/3
5700000*5/100
285000+1900000+92934
387000+753000+984000
(2277934/2124000)-1
FPSB India/Public
OCT-2009
FV(0.83552%,12,-5000,0,1)
FV(0.83552%,12,-5500,-63360,1)
FV(0.83552%,12,-6050,-139710,1)
FV(0.83552%,12,-6655,-231045,1)
FV(0.83552%,12,-7321,-339638,1)
FV(0.83552%,12,-8053,-468066,1)
FV(0.83552%,12,-8858,-619256,1)
FV(0.83552%,12,-9744,-796524,1)
FV(0.83552%,12,-10718,-1003631,1)
FV(0.83552%,12,-11790,-1244831,1)
FV(0.83552%,12,-12969,-1524939,1)
FV(0.83552%,12,-14266,-1849398,1)
FV(0.83552%,12,-15692,-2224360,1)
FV(0.83552%,12,-17261,-2656770,1)
FV(0.83552%,12,-18987,-3154468,1)
FV(0.83552%,12,-20886,-3726299,1)
FV(0.83552%,12,-22975,-4382232,1)
FV(0.83552%,12,-25272,-5133506,1)
FV(0.83552%,12,-27800,-5992778,1)
FV(0.83552%,12,-30580,-6974298,1)
FV(0.83552%,12,-33637,-8094107,1)
FV(0.83552%,12,-37001,-9370245,1)
21)
C)
Current market value of units
Premium allocated Apr.'05
Current Value Oct.'09
Intrinsic Return of the Plan (Invested value)
312,000
-42,500
-47,500
-49,000
-49,000
-49,000
312,000
4/27/05
4/27/06
4/27/07
4/27/08
4/27/09
10/23/09
(-50000*0.85)
(-50000*0.95)
(-50000*0.98)
(-50000*0.98)
(-50000*0.98)
11.45% XIRR
We expect this performance of the Plan to continue till its maturity on 27th April, 2025.
The approx. value of investment as on 27th
329,376 (before making the installment due on 27th Apr-2010)
Apr-2010
From the Sixth year onwards 100% premium allocation is made in the Plan.
That is, from 27th Apr-2010 to 27th Apr-2024 Rs. 50,000 would be invested every year on the same date on yearly rests.
The approximate accumulated amount of
3,661,469 FV(11.45%,15,-50000,-329376,1)
units in ULIP as on 27th Apr-2025
Funds required for marriage
3,000,000
Surplus
661,469 3661469-3000000
Rs. 6.6 lakh
22)
C)
Rate of interest
17% p.a. monthly compounding
Outstanding tenure (EMIs from Nov.'09 to
8 months
June'10)
Outstanding principal (as on 1st October,
107,000
2009)
This outstanding amount is the Present Value of 8 future EMIs @ 17% p.a. compounded monthly
Hence, the EMI
14,242 PMT(17%/12,8,-107000,0,0)
Pre-closure charges (2% of outstanding
2140 107000*0.02
principal)
Loan outstanding on 1st Nov09 if not
107,000
continued further
Interest accrued and due on principal on 1st
1,516 107000*17%/12
Nov09
Total amount to be paid on 1st Nov 2009 to
110,656 2140+107000+1516
repay the loan
If this amount is invested over 8 months by reducing EMI of Rs. 14,242, the rate of interest to sustain this arrangement is
0.8427% monthly compounded
RATE(8,14242,-110656,0,1)
(This amount is the present value of 8 monthly payments of Rs. 14,242 at the required rate of return)
Thus, annual yield of the investment vehicle to correspond to this monthly effective rate of interest
FPSB India/Public
OCT-2009
312000*(1+11.45%)^(1/2)
10.59% (1+0.8427%)^12-1
23)
C)
Proceeds from income and redemption of Bonds invested in Balanced MF scheme yielding 10.50% p.a.
50,000 5000*100*0.1
Income to be received on 1st Jan-2010
Accumulated value as on 31st Dec-2010
Part redemption money + income on 1st Jan5000*100*0.1+5000
175,000 *(100*0.25)
Accumulated value as on 31st Dec-2011
2011
37500 5000*(100*0.75)*0.1 Accumulated value as on 31st Dec-2012
37,500 5000*(100*0.75)*0.1 Accumulated value as on 31st Dec-2013
Part redemption money + income on 1st Jan5000*(100*0.75)*0.
2014
212,500 1+5000*(100*0.35) Accumulated value as on 31st Dec-2014
Part redemption money + income on 1st Jan5000*(100*0.4)*0.1
220,000 +5000*(100*0.4)
2018
Funds available as on 1st Jan-2018 for accumulation in Balanced MF scheme out of Bond proceeds
1,203,532 220000+983532
This money is allowed to accumulate for 14 years (till 31st Dec-2031) in Balanced MF scheme
Accumulated funds as on 31st Dec-2031
4,870,006 1203532*1.105^14
24)
25)
26)
A)
PPF A/c. matures on 1st Apr-2018
Balance as on 31st Mar-2009
Contribution of Rs. 5,000 made on 1st Jan-2010
Balance in the PPF A/c. to be on 31st Mar2010
427,000
466,260 ((427000+(427000*0.08))+(5000+5000*0.08*3/12))
Beginning 1st April, 2010 contribution of Rs. 5,000 is made every year in the beginning of April till April, 2017, i.e. 8 installments
Rs. 5,000 made in the beginning of every financial year would yield interest of Rs.
400 5000*0.08
Hence, this would be Rs. 5,400 contribution for 8 years to accumulate
920,453 on maturity on 1st Apr-2018
FV(0.08,8,-5400,-466260,0)
B)
This is permissible subject to such an arrangement finding an explicit mention in the Financial Plan for the said activity
C)
Current cost of construction of workshop and office
Cost of equipment
Total cost to be incurred on reinstatement
Insured value
Underinsurance
3,500,000
1,800,000
5,300,000
5,000,000
-300,000
(Reinstatement basis)
(No such basis given, to be considered as Indemnity value)
3500000+1800000
5000000-5300000
FPSB India/Public
OCT-2009
55,250 50000*1.105
(55250+175000)*1.105
254,426
322,579 (254426+37500)*1.105
397,887 (322579+37500)*1.105
(397887+212500)*1.105
674,477
767,397 (674477+20000)*1.105
870,074 (767397+20000)*1.105
983,532 (870074+20000)*1.105
27)
B)
Annual Premium paid per annum
Total premium paid : 5 installments till date
50,000
250,000 50000*5
Maximum top up permissible as per IRDA guidelines, as a percentage of total regular premia
paid till date without increasing the sum assured
25%
Hence, maximum Top Up amount to be invested today 62,500 250000*25%
28)
B)
Gross return
Net of Tax return
9% p.a.
8.1% p.a.
9%*(1-0.1)
Rs. 4 lakh invested annually from April, 2010 to April, 2016 will accumulate @ 8.1% p.a.
in the beginning of April, 2017
3,870,051 FV(0.081,7,-400000,0,1)
This money is reinvested without any further contribution for 6 months to mature in October, 2017
to accumulate to
4,023,736 3870051*(1.081)^(1/2)
FPSB India/Public
OCT-2009

018 Oct 09 Kartik1

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FPSBI/M-VI/10-01/09/WN-18

Solution: Kartik Gupta

Expenditure in the first month after retirement

Present Value of edcation and Marriage

Solutions : Chandrika Raj

Outstanding amount as on 1st October, 2009

Redeemed on 1st Jan-2017 and invested in

Accumulated amount in equity growth fund

Accumulated amount in equity growth fund

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