Level 4 - (Workbook)

Curtailment in expenses 18.66% (1-(2845699/3498782)) Q15 B) ₹44850 (Solution given below) Present age of Ashwin 34 years Retirement age 60 years revised corpus needed from the above question ₹78288075 Suppose a total monthly amount of ₹100 is invested in the asset allocation of equity and debt components cumulatively Accumulation to meet the retirement corpus Equity shares portfolio; current balance ₹ 1832000 Accumulation in 20 years (considering 11% p.a.) ₹ 14770155 (1832000*1.11^20) Accumulation of up to retirement (next 6 years) ₹ 23438379 (14770155*1.08^6) Balance to be accumulated through asset allocation fund ₹54849696 = (78288075-23438379) 1st five years of asset allocation 11% Equity return 7.50% Debt return ₹ 70 Equity investment per month ₹ 30 Debt investment per month Equity component accumulation in 5 years ₹ 5538 (Begin, N=5*12, I=11, PV=0, PMT=-70, FV=0, P/Y=12, C/Y=1) Debt accumulation in 5 years ₹ 2175 (Begin, N=5*12, I=7.5, PV=0, PMT=-30, FV=0, P/Y=12, C/Y=1) Total accumulation after 5 years ₹ 7713 (5538+2175) Next 15 years = Rebalance assets allocation Rebalanced Equity component accumulated (40%) ₹ 3085 (40% of 7713) Rebalance Debt component accumulated (60%) ₹ 4628 (60% of 7713) Revised equity investment per month ₹ 40 Revised debt investment per month ₹ 60 Equity investment accumulation in total 20 years ₹ 32243 CFP Final Level: Workbook Page 93

Set = Begin ₹ 33254 N = 15*12 I = 11% ₹ 65497 (32243+33254) PV =-3085 ₹ 200 p.m. PMT = -40 ₹122296 FV =? P/Y=12, C/Y=1 ₹44850 ((54849696/122296)*100)) Debt investment accumulation in total 20 years Set = Begin N = 15*12 I = 7.5% PV = -4628 PMT = -60 FV =? P/Y=12, C/Y=1 Total accumulation in asset allocation (20 years) Last 6 years; 8% yield retirement fund Monthly investment (Double) Investment accumulated up to retirement Set = Begin N = 6*12 I = 8% PV = -65497 PMT = -200 FV =? P/Y=12, C/Y=1 Actual monthly investment equivalent to ₹100 CFP Final Level: Workbook Page 94

Additional Solutions Q.1 B) gold ETF is better than buying physical gold Q.2 A)House covers on reinstates value and goods cover on their market value Q.3 B) Code of ethics of confidentiality Q.4 B) Principal of utmost good faith Q.5 C) Current money terms Q.6 B) His father Q.7 A) Amount of loan including processing fees 450000 EMI 11685 (CMPD;End, N=48, I=11.25, PV=450000,FV=0,P/Y=C/Y=12, PMT=solve(11685)) Outstanding loan 1st September 2020 202503 (AMRT;PM1=1, PM2=29,BAL=solve(202503)) Prepayment penalty (4% of Outstanding balance) 8102 Amount to be paid along with penalty Rs.210603 Q.8 C) 1st instalment 1-Apr-2020 1,050,000 11,607 (CMPD;End, N=15X12, I=10.5, PV=1050000, FV=0, P/Y=C/Y=12, PMT=solve(11607)) 2nd instalment 1-Sep-2020 2,100,000 23,489 (CMPD;End, N=15X12-5, I=10.5, PV=2100000, FV=0, P/Y=C/Y=12, PMT=solve(23489)) 3rd instalment 1-Dec-2020 2,100,000 23,663 (CMPD;End, N=15X12-8, I=10.5, PV=2100000, FV=0, P/Y=C/Y=12, PMT=solve(23668)) 4th instalment 1-Apr-2021 1,750,000 19,923 (CMPD;End, N=15X12-12, I=10.5, PV=1750000, FV=0, P/Y=C/Y=12, PMT=solve(19923)) Final EMI payable = 11607+23489+23663+19923 = Rs.78,682 Q.9 D) CMPD; Begin, N=20X12, I=solve(1.26%), PV=-34000000, PMT=160000, FV=0, P/Y=12,C/Y=1 Required return = (1+0.0126)*(1+0.05)-1 = 0.06323x100=6.32% Additional yield over and above risk-free rate = 6.32 – 6 = 0.32% CFP Final Level: Workbook Page 95

Case Study – 2 (Gurpreet) (Reference Date: 1st April, 2020) Gurpreet, aged 43 years, having twins Roshan and Geet of age 14 years, is a software engineer in a company based in Mumbai. His spouse passed away recently. Both his children study in the 8th Standard. His average monthly household expenses are ₹ 1.40 lakh, which include rent of ₹ 45,000 on the rented apartment, but exclude car loan EMI and all insurance premiums. He has approached you, a CFPCM practitioner, for preparing a financial plan for his family. He has shared the following financial information with you: Gurpreet’s Assets & Liabilities (As on 31stMarch, 2020) Assets (₹ Lakh) Equity MF schemes portfolio : 26.47 Balanced MF schemes portfolio : 9.78 Equity shares portfolios14 : 55.92 Gold Jewelry : 2.17 Gold ETF2 : 3.21 PPF A/c3 : 7.87 Equity linked savings scheme4 : 22.75 Physical Gold (coins/bars) : 11.25 Car : 4.80 Liquid fund scheme : 10.25 Corporate bonds of M/s.XYZ Ltd.5 : 8.50 Bank account – Gurpreet6 : 103.25 Liabilities (₹ Lakh) Car loan7 : 5.01 Credit Cards : 0.72 Salary Income (Annual) (₹ lakh) 1 Securities at cost Rs.35.62 lakh. Last purchase made in March, 2017. 2 Invested Rs.1.6 lakh on 17th July 2019 in the NFO of Gold ETF. 3 Account maturing on 1st April, 2026. 4 Invested Rs.1,00,000 every year for 6 years from 2008 to 2013. 5 Invested in 5 years bonds is stated at face value, purchased on issue on August, 18, 2016; coupon rate 11% p.a. payable half yearly on 1st October and 1st April every year. 6 Received Rs.80 lakh towards insurance claim on the life of his deceased wife. 7 Taken in August 2018 at 11% p.a. on reducing balance basis for a term of 4 years CFP Final Level: Workbook Page 96

Basic Salary : 30.00 Dearness Allowance : 9.00 HRA : 4.80 Special Allowance : 0.90 Variable Salary (Bonus) : 6.00 Employers’ contribution to PF : 3.60 Other cash outflows (Annual) (₹) Term Plan Insurance premium : 62,857 (Total Cover ₹ 1.5 crore) Endowment Insurance premium85 : 1,75,527 (Sum assured ₹ 30 lakh) Health Insurance Premium : 27,631 (Annual – 2 policies/ Total cover Goals: ₹ 20 lakh) You, in consultation with Gurpreet, have crystallized the following financial goals for his family and the preliminary Roadmap to achieve them: 1. Send both the children to a Boarding School immediately – Outlay ₹ 5.15 lakh per child per annum – for 4 years – To be met year on year basis by investing a suitable corpus today. 2. Buy a house – within one year – Outlay of ₹ 1.5 crore – Take a loan not exceeding Rs.50 Lakh with full repayment coinciding with retirement. 3. Send Roshan for Higher Education abroad after he completes boarding education. The estimated outlay is ₹ 1.50 crore then. 4. To send Geet for a course in fashion technology of 4 years duration after she completes boarding education. The current cost is Rs.10 lakh per year, escalating at 8% 5. Retirement Corpus – To be accumulated in 17 years – Corpus to sustain inflation adjusted income equivalent to current Rs.80,000 monthly for 25 years post retirement. 6. Undertake a world cruise Trip with both children on their completing higher education/professional course. The trip cost in US Dollars 50,000 per person at current exchange rate of 66.76 INR/USD. Average annual rupee depreciation vis-à-vis USD of 2% and cost escalation of Trip at 3% p.a. is expected. 7. To accumulate funds for marriage of his children, each marrying sometime after their respective age of 25. Each marriage costs today Rs. 25 lakh, such costs escalate by 7% p.a. 8. Suitable Estate planning to cover all his physical and financial assets. Life Parameters 8 Term of 20 years, Purchased on 15th March, 2010. Page 97 CFP Final Level: Workbook

Gurpreet’s expected life : 85 years Assumptions regarding pre-tax returns on various asset classes (1-3 years): 1) Equity & Equity MF Schemes/Index ETFs : 11.00% p.a. 2) Balanced MF Schemes : 9.50% p.a. 3) Bonds/Govt. Securities/Debt MF Schemes : 7.50% p.a. 4) Liquid MF Schemes : 6.00% p.a. 5) Gold & linked investments : 6.00% p.a. 6) Real Estate Appreciation : 6.50% p.a. 7) Bank/Post Office Term Deposits (> 1 year) : 7.25% p.a. 8) Public Provident Fund/EPFO : 7.75% p.a. Assumptions Regarding Economic Factors: : 5.00% p.a. 1) Inflation : 5.50% p.a. 2) Expected Return in Risk Free Instruments Cost Inflation Index: 2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264 2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272 2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280 2019-2020 289 2020-2021 301 CFP Final Level: Workbook Page 98

Case Study - 2 (Gurpreet) (Reference Date 1st April 2020) (1) Gurpreet has already equity shares investment and further planning to invest in two companies ABC & XYZ. The coefficient of correlation between the two stocks is 0.9. The standard deviation of return for ABC is 14% and standard deviation return for XYZ is 16%. Expected return for ABC is 11% while the XYZ expected return is 13%. Calculate standard deviation of gurpreet portfolio for which he plans to invest 4 lakh in ABC and 1 lakh in XYZ? [2 Marks] A) 14.14 B) 12.50 C) 12 D) 12.3 (2) After preparing the financial plan of Gurpreet, you have given following notes to the plan; 1. These recommendations are made for your benefit only. 2. These recommendations are based on the information provided by you on your current situation; we expect this information to be completed and accurate. 3. Returns on investments will depend on market conditions and policy of fund management followed by fund managers. 4. The investments planned for you long term in nature; therefore volatilities of short term in nature should be ignored. These notes are ____________ to your plan. [2 Marks] A) Disclosures B) Disclaimers B) Executive summary D) Additions (3) Gurpreet has endowment policy whose sum assured is ₹ 30 lakh and a term of 15 years. Gurpreet wants to know what amount he will get on maturity of this policy if simple reversionary bonus of ₹30 per 1000 SA is assumed for 5 years and ₹50 per 1000 SA for balanced term. (Assume the policy would also give final additional bonus of ₹ 70 per 1000 SA and also calculate return on the policy? [3 Marks] A) 7.90% and ₹ 2000000 B) 6.80% and ₹ 3200000 C) 8% and ₹ 5160000 D) 5% and ₹ 3000000 (4) Gurpreet wants to create a trust that would receive a corpus, in case of any eventuality with Gurpreet’s life and utilize the corpus as follows. A sum of ₹75 lakh towards purchase of house for the accommodation of both children’s, their current living expenses till his Gurpreet’s retirement CFP Final Level: Workbook Page 99

and should cover their educational expenses,8% escalation hence are required inflation adjusted, when drawn from risk free instruments. Estimate additional life insurance coverage? [4 Marks] A) ₹4 crore 30 lakh B) ₹4 crore B) ₹2 crore 91 lakh D) ₹5 crore (5) You have suggested to set aside 10% of his equity MF portfolio for the purpose of his abroad trip. In addition, you have advised to start monthly investments today in a ratio of 50%: 50% in balanced fund and debt fund for seven years. At the beginning of 8th year, new investment allocation will be in ratio of 30%: 70% and portfolio to be switched to Liquid fund for balance term. Calculate monthly investment required for 10 years. ( consider current cost of world trip is Rs.10 lacs ) [5 Marks] A) Rs.7059 B) Rs.5900 C) Rs.6013 D) Rs.5113 (6) Gurpreet wants to set aside a lump sum fund required today in debt fund for Geet ( higher education commence from age 18 years) assume that the cost of education is expected to increase @ 10% p.a. He wants to know how much fund he needs to set aside in debt. [3 Marks] A) ₹ 4540636 B) ₹4589709 C) ₹5010204 D) ₹4657488 (7) Gurpreet wants to purchase a child life insurance plan from a life insurance company to meet his kid’s educational needs. He wants to know, if he gets permanent physical disabled due to accident which would hamper his income pursuits, by what mean can policy be kept in force without payment of further premium but retaining intended benefits. You advice_______? [2 Marks] A) Payor rider B) Living benefit rider C) Survivor purchase option rider D) Dreaded diseases rider (8) Gurpreet has invested ₹6 lakh in a NFO of a separate fund house mutual fund balanced scheme on 1st October 2019 at ₹10 per unit with entry load of 2.25% and exit load nil. With SWP of ₹15,000 per month effective from 1st April 2020. From 1stOctober 2019 to 31st January 2020 the NAV of the scheme grew at an average rate of 2.5% per month, while from 1stFebruary 2020 till date, the NAV declined at an average rate of 3.20% per month. Gurpreet wants to know the tentative value of units outstanding in his Mutual fund scheme account as on 30 April 2021 assuming the decline continue till 30th April 2021. Assuming that the SWP is effective on 1st of every month. You estimate the same is ______? [4 Marks] CFP Final Level: Workbook Page 100

A) ₹200500 B) ₹215605 C) ₹241177 D) ₹256666 (9) Calculate the net-worth of Gurpreet considering his financial Assets only? [3 Marks] A) ₹25000000 B) ₹32500000 C) ₹24227000 D) ₹19867000 (10) Gurpreet wants to invest for his retirement corpus as per goal. In this connection you suggest him to transfer his bank amount balance (₹3000000) to a suitable liquid fund and also utilize his current holding in equity MF scheme and balance MF scheme , while investing every month to the extent of ₹30,000 in equity MF and 20,000 in balanced MF from the liquid fund from today. After this arrangement is over the money invested would continue to grow to suffer a tax incident of 4%. He wants to know how long post-retirement this corpus would sustain to give him a desired annuity, if the same is invested in risk-free instrument ( consider tax on capital gains applicable for monthly withdrawals from liquid is paid separately by Gurpreet). [5 Marks] A) 10.14 years B) 8.68 years C) 21 years D) 9.5 years (11) Gurpreet wants to create a private trust in the name of his children’s. According to you who of the following are correct in case of private Trust? [2 Marks] A) A trustee shall be any known person capable of holding property. B) A trustee has to be declared non-testamentary instrument in writing, signed and registered or by the will of author of the trust or of the trustee in case of an immovable property C) A trustee would be taxed in his hands in a representative capacity where the beneficiary is minor, lunatic or idiot or specifically entitled to receive income from the trust. D) The author of the trust can be the trustee himself. 1. (III) and (IV) 2. (II) and (III) 3. (II), (III) and (IV) 4. (I), (III) and (IV) (12) Gurpreet wants to invest in NSC after 6 months in the name of Roshan and Geet. She wants to know the taxability of interest accrued and the maturity amount on NSC. (Assume tax provisions of FY 2020-21 would prevail). [2 Marks] A) Will not be taxed they as they are minors CFP Final Level: Workbook Page 101

B) Would be clubbed with Gurpreet’s income in the year in which interest accrues and would be Eligible to deduction under section 80C, the maturity amount would be exempt from tax C) Would be clubbed with Gurpreet’s income in the year in which interest accrues and would not be eligible for deduction under section 80C, the maturity amount would be exempt from tax D) The children would taxed on interest earned at the time of maturity of NSC. (13) Gurpreet wants to know his tax liability on income from capital gains for the financial year 2018- 19 if he sells his entire listed equity shares, Gold ETF, physical gold coins and gold jewelry. The Gold coins were gifted to Gurpreet on the occasion of his marriage on 26 March 2005. The cost of such Gold coins was ₹45250 at the time of purchase i.e. f.y. 2004-05, gold jewelry purchased for Rs. 250000 on 1 may 2014. (Ignore education cess) [5 Marks] A) ₹153160 B) ₹ 368340 C) ₹355659 D) ₹373704 (14) Gurpreet had purchased 1000 equity shares of X Ltd., listed in stock exchanges in India and abroad in April 2014 at the rate of ₹225 per share. Fair market value as on 31st Jan 2019 was Rs.390 per share. He intends to transfer today all the shares at a price of ₹450 per share privately to his brother in an off-market deal. Calculate his capital gains tax liability for AY 2021-22. [3 Marks] A) ₹28870 B) ₹28780 C) ₹23175 D) ₹34900 (15) An advisor advised Gurpreet to buy Endowment policy, he wants to know the importance of waiver of premium rider from you? A) It is useless as there will not be any amount to be received from the Insurance Company at the time of maturity of the policy B) It is very useful as all future premiums would be waived by the Insurance Company in case theLife Assured becomes totally and permanently disabled C) It is same as Permanent Disablement rider hence need not be mentioned separately D) It is inbuilt with all the Term Insurance plans and thus need not be mentioned separately CFP Final Level: Workbook Page 102

Additional Questions (1) Gurpreet wants to know relative advantages of having exposure of Gold as an asset class through Gold ETFs which can be purchased and traded as units through the Demat A/c which of the following is not appropriate in this context? A) In Gold ETF, LTCG tax is levied after one year of purchase against 3 years in case of physical gold. B) In case of an investor holding physical gold, He has to pay wealth tax after the net worth crosses a certain limit and no wealth tax if gold ETF units. C) Most of Gold ETF schemes available in India reflect International prices of Gold and are insulated from local demand-supply factors. D) Securities Transaction Tax (STT) is applicable on purchase and sales of Gold ETFs units. (2) You have noticed that Gurpreet has many cards, you advise him to immediately go for card protection policy. He wants to know the benefits of this policy: 1) You can block all your cards with a single phone call 2) This is applicable only for financial cards like credit cards, debit cards and ATM cards 3) This applicable for all the cards including driving license, PAN card, etc 4) This helps at the time of reapplying for the cards A) Only 1 & 2 B) Only 1, 2 & 3 C) Only 2 & 3 D) Only 1 (3) Gurpreet is seriously concerned with the ongoing rising inflation. Taking a bitter experience of his earlier Equity investments, he is keen to make some investments in debt instruments. Keeping in view the constantly Rising inflation rate into account, which type of investment, from the given options, is advisable for Gurpreet in the current scenario? A) Bank FDR B) Long Term Bonds C) Short Term Bonds D) Floating Rate Bonds (4) To fund Roshan’s higher education after 4 years Gurpreet will take a loan of 50 lakhs then. He will also need to buy a house in USA worth 80 lakhs now escalating @ 2.5% p.a. You advise him to invest 99 lakhs from his savings account into an instrument yielding 5% over and above the risk free return and also do a SIP in same instrument. What is the additional SIP he will have to do to achieve the goal? (Goal: Send Roshan for Higher Education abroad. The estimated outlay is Rs.1.3 crore then for 5 years) (Assumption: Risk-free Instrument- 6.5%; Inflation – 5.5%) CFP Final Level: Workbook Page 103

A) Rs.25306 B) Rs.56980 C) Rs.30987 D) Rs.34567 (5) You advise Gurpreet to save Rs.7000 every month, in Equity, Balanced and Debt funds in the ratio of 40:40:20. The investment has to be increased every two years by 20%. What would be the total amount accumulated for Geet’s Marriage after 11 years? (Assumption: Equity – 11%; Balanced - 9%; Debt – 7%; Liquid – 5.5%; Inflation – 5.5%) A) Rs.2456789 B) Rs.2311339 C) Rs.2567894 D) Rs.3456753 (6) Gurpreet wants to take a trip abroad with his children when he attains 53 years of age. The current cost of trip is Rs.10 lacs. He wants to accumulate funds for the same through investing monthly SIP 100% Equity for 5 years, beginning of 6th he will rebalance fund as per new asset allocation equity and debt is 50:50 respectively. Beginning of 9th year, he will redeem the entire corpus and invest in to risk free instrument for balance years. (Note: the cost of trip escalates at 9%) He wants to invest in monthly SIP from today for five years only? A) Rs.20544 B) Rs.34560 C) Rs.25780 D) Rs.56434 (7) Gurpreet wants to set aside lumpsum funds for the boarding school expenses of the both children from a bank A/C. For this purpose, how much amount should he invest today if he is thinking to invest in a portfolio of 40% Equity MF and 60% Balanced MF. (Assume that the boarding school expenses are expected to escalate @ 7.5% p.a.) A) Rs.3992345 B) Rs.2598762 C) Rs.2098432 D) Rs.2890452 CFP Final Level: Workbook Page 104

Solutions Q1 A) 14.14 (Solution given below) Portfolio amount = 4+1 lakh 5 lakh Weightage of ABC 0.80 Weightage of XYZ 0.20 Calculation of the portfolio variance = 0.80^ (2)*14^ (2) +0.20^ (2)*16^ (2) +2*0.80*0.20*0.90*14*16 = 200.192 Standard deviation of portfolio √200.192 = 14.14 Q2 B) Disclaimers ₹30 lakh Q3 C) 8% and ₹5160000 ₹450000 (30/1000*3000000*5) ₹1500000 (50/1000*3000000*10) (Solution given below) ₹210000 Sum assured ₹5160000 Rev. Bonus for 1st 5 years Rev. Bonus for the last 10 years Additional bonus = 70/1000*3000000 Maturity Amount Calculating return N = 15 I =? (8%) PV = 0 PMT = -175527 FV = 5160000 P/y = C/y = 1 Q4 C) ₹2 crore 91 lakh (140000-45000)*12 = 1140000 (Solution given below) 5.5% Present annual Expenses Risk free rate Page 105 CFP Final Level: Workbook

Escalation rate 5% Present Value of Annual living expenses from age of 43 to 60 ₹18665646 N = 17 I = 0.476……. % (5.5-5)/1.05 PV =? PMT = -1680000 FV = 0 P/y=1, C/y = 1 Present value of boarding school ₹4268773 (Inflate expenses for each year @ 8% & then discount it by 5.5%) N=4 I = -2.314……. % (5.5-8)/1.08 PV =? PMT = 1030000 FV = 0 P/y=1, C/y = 1 Present Value of Roshan Higher Education ₹12108251 (15000000/1.055^4) Present value of Geet higher education ₹ 4551463 ₹(5638464/1.055^4) N=4 I = -2.314……. % (5.5-8)/1.08 PV =? (-4144440) PMT = 1360489(1000000 x 1.08^4) FV = 0 P/y=1, C/y = 1 Present value of House to accommodate ₹7500000 Total value of All PV 47094133 (7500000+18665646+4268773+12108251+4551463) Term insurance cover ₹15000000 Endowment cover ₹3000000 CFP Final Level: Workbook Page 106

Total cover ₹18000000 Additional cover required ₹29094133 (47094133-18000000) Q5 D) Current cost 1000000 Inflation 5.00% FV value of goal after 10 years Rs. 16,28,894.63 Equity MF portfolio today 2647000 10% of portfolio 264700 FV of equity portfolio after 10 years Rs. 7,51,594.74 Shortfall = 1628894.63-751594.74 = Rs. 8,77,299.89 Let us assume Rs.100 p.m. will be invested in balance fund and debt fund in the ratio 50:50 FV of balance fund investment after 7 year Rs. 5785.83 (CMPD;N=7x12, I=9, PV=0, PMT=-50,P/Y=12, C/Y=1, FV=solve) FV of debt fund investment after 7 year = Rs.5387.26 (CMPD;N=7x12, I=7, PV=0, PMT=-50,P/Y=12, C/Y=1, FV=solve) Total FV after 7 year = 5785.83+5387.83 = 11173.09 FV after 3 more years(Liquid fund) = 13119.90 According to new ratio Rs.100 will be invested in balance fund & debt fund (30:70) FV of balance fund investment after 3 year = Rs.1236.89 (CMPD;N=3x12, I=9, PV=0, PMT=-30,P/Y=12, C/Y=1, FV=solve) FV of debt fund investment after 3 year = Rs.2801.85 (CMPD;N=3x12, I=7, PV=0, PMT=-70,P/Y=12, C/Y=1, FV=solve) Total FV after 3 years = 1236.89+2801.85 = 4038.74 FV after 10 years = 13119.90+4038.74 = 17158.64 SIP required = (877299.89x100)/17158.64 = Rs.5113 p.m. Q6 A) ₹4540636 (Solution given below) Geet higher education Debt return = 7.5% I = (7.5-10)/1.10 Go to Cash editor insert 1 to 4 = 0 5 = 1000000 6 = 1000000 7 = 1000000 CFP Final Level: Workbook Page 107

8 =1000000 Calculate NPV = ₹4540636is the answer Q7 A) Payor rider Q8 C) ₹241177 (Solution given below) Original investment on 1st October 2019 ₹6 lakh NAV = 10 Purchase price ₹10.225 (10*1.0225) Units allotted 58679.7066 (6, 00,000/10.225) SWP started 1st April 2020 ₹15, 000 per month NAV grew from 1st October 2019 to 31st January 2020 2.5% Estimated NAV as on 31st January 2020 11.038 (10*1.025^4) NAV declined from 01 February 2020 to 31st march 2020 -3.20% Estimated NAV as on 31st march 2020 11.038.3429*((1-0.0320)^ (2)) Date Estimated Amount Units Outstanding units NAV SWP redeemed 1st April 2020 15,000 1450.270 57229.4366 1st may 2020 10.3429 15,000 1498.217 55731.2196 1st June 2020 10.0119 15,000 1547.748 54183.4716 1st July 2020 9.6915 15,000 1598.925 52584.5466 1stAug 2020 9.3813 15,000 1651.800 50932.7466 1st Sep 2020 9.0810 15,000 1706.406 49226.34 1st Oct 2020 8.7904 15,000 1762.818 47463.522 1st Nov 2020 8.5091 15,000 1821.095 45642.427 1st Dec 2020 8.2368 15,000 1881.302 43761.125 1st Jan 2021 7.9732 15,000 1943.508 41817.617 1st Feb 2021 7.7180 15,000 2007.76 39809.857 1st March 2021 7.4710 15,000 2074.143 37735.714 1st April 2021 7.2319 15,000 2142.857 35592.857 7.000 CFP Final Level: Workbook Page 108

30thApril 2021 6.776 35592.857 Estimated value on 31st April 2021 (6.776x35592.857) = ₹241177 Q9 C) ₹ 24227000 26.47 lakh ASSETS 9.78 lakh Equity MF 55.92 lakh Balanced MF 3.21 lakh Equity Shares 7.87 lakh Gold ETF 22.75 lakh PPF A/C 10.25 lakh ELSS 8.50 lakh Liquid Fund 103.25 lakh Corporate Bond ₹24800000 Bank account Total Value of Assets 0.72 lakh LIABILITIES 5.01 lakh Credit cards ₹573000 Car loan ₹24227000 Total Value of Liabilities Net worth = Assets – liabilities Q10 B) 8.68 years (Solution given below) If ₹50, 000 are drawn every month with immediate effect from this account, The number of months this arrangement will sustain 70.72 or 71 months Set = begin N =? (70.72) I=6 PV = -3000,000 PMT = 50,000 FV= 0 CFP Final Level: Workbook Page 109

P/y=12, C/y=1 Return on equity 11% Return on balanced fund 9.5% Market value of equity and balance fund (26.47 lakhs, 9.78 lakhs) Market value at the end of the month till this arrangement last Equity fund = ₹7867659 balanced fund = ₹3560004 Begin Begin N = 71 N = 71 I = 11 I = 9.5 PV = -2647000 PV = -978000 PMT = -30,000 PMT = -20,000 FV =? FV =? P/y=12, C/y=1 P/y=12, C/y=1 Balanced period till retirement = 17*12-71 133 months Market value of investment till retirement Equity MF = 25013543 balanced MF= 9733978 Set = begin Set = Begin N = 133/12 N = 133/12 I = 11 I = 9.5 PV = -7867659 PV= -3560004 PMT = 0 PMT = 0 FV =? FV=? P/y=1, C/y=1 P/y=1, C/y=1 Total corpus = 25013543 + 9733978 ₹34747521 Net corpus post tax = 34747521*(1-4%) ₹33357620 Risk free rate 5.5% Inflation 5% Real rate of return = 0.5/1.05 0.4761…..% Current HHE = Rs.80000 pm CFP Final Level: Workbook Page 110

HHE at retirement = 80000*1.05^17 = 183361 Set = begin N =?= 188.768 I = 0.4761…..% PV = -33357620 PMT = 183361 FV = 0 P/y=12, C/y=1 Corpus can be withdrawn for 188.768/12 = 15.73 years. Q11 (II), (III) and (IV) Q12 C) would be clubbed with Gurpreet’s income in the year in which interest accrues and would not be eligible for deduction under section 80C, the maturity amount would be exempt from tax. Q13 D)373704 5592000 (Solution given below) 3562000 1) Equity shares 2030000 Sales Consideration Less cost of acquisition 321000 Long term capital gain 325405.40(160000 * 301/148) 2) Gold ETF (-4405.4) Sales Consideration Less indexed cost of acquisition 1125000 Long term capital loss 120533 (45250 *301/113) 3) Gold coins 1004466.8 Sales Consideration Less indexed cost of acquisition 217000 Long term capital gain 4) Gold Jewelry Sales Consideration CFP Final Level: Workbook Page 111

Less indexed cost of acquisition 313541.6 (250000 *301/240) Long term capital loss (-96541.6) Net long term capital Gain other than equity shares (1004466-96541-4405) 903520 Tax on 903520@ 20% = 180704 Tax on equity shares 2030000-100000=1930000@10% 193000 TOTAL TAX =180704+193000 = 373704 Q14 D) ₹32120 450000 (1000*450) (Solution given below) Option - 1 282187 (225000*301/240) Sales Consideration Less indexed cost of acquisition 167812.5 Long term capital gain Tax @ 20 % 33563 Add education cess Tax liability from capital gains 1342 Round off Option - 2 34905 Sales consideration (Less) cost of acquisition 34900 Long term capital gain Tax @ 10 % without indexation 450000 (1000*450) Add education cess 225000 (1000*225) Tax liability from capital gains 225000 22500 900 23400 Q15. B) It is very useful as all future premiums would be waived by the Insurance Company in case the Life Assured becomes totally and permanently disabled. CFP Final Level: Workbook Page 112

Additional Solutions Q.1 D) Q.2 D) Q.3 D) Q.4 A) No. of years for goal 4 Loan for Education 5000000 Cost of house today 8000000 After 4 years value of house 8830503 (CMPD;N=4, I=2.5, PV=-8000000, PMT=0, FV=solve(8830503)) Total amount required after 4 years 16830503(8830503+5000000) PV of saving account balance 9900000 SIP required ₹ 25306 (CMPD;N=4x12, I=11.5, PV=-9900000,PMT=solve, FV=16830503,P/Y=12,C/Y=1) Q.5 B) Time frame for Geet's Marriage is 11 years. So investment period will also be of 11 years Increase in SIP Amount after every 2 years Ratio 40 40 20 SIP amount No of yrs Equity Balanced Debt 11% 9% 7% 2 2800 2800 1400 7000 FV after 2 yrs 75,053 73,602 36,081 2 3360 3360 1680 8400 FV after 4 yrs 1,82,536 1,75,770 84,606 2 4032 4032 2016 10080 FV after 6 yrs 3,32,979 3,14,819 1,48,822 2 4838.4 4838.4 2419.2 12096 FV after 8 yrs 5,39,955 5,01,222 2,32,735 2 5806.08 5806.08 2903.04 14515.2 FV after 10 yrs 8,20,908 7,48,124 3,41,275 1 6967.296 6967.296 3483.648 17418.24 FV after 11 yrs 9,99,717 9,03,084 4,08,537 CFP Final Level: Workbook Page 113

Total accumulation for her marriage Rs.2311339 Q.6 A) Current cost of trip Rs. 10,00,000 Future value of abroad trip after 10 years Rs. 23,67,364 Let us assume that initial SIP investment Rs.100 p.m. FV after 5 years Rs.7911.55 For 6 to 8 years portfolio rebalance Equity(50%) Debt(50%) Rs.3955.78 Rs.3955.78 Rs.4846 Future value after 2 years Rs.5410 Total accumulated fund Rs.10256 FV after 9th and 10th year(risk free) Rs.11524 Monthly SIP amount (2267364x100)/11524 = 20543 Q.7 A) Weighted average return = (11*0.4)+(9*0.6)= 9.8% FV of Exp. PV of exp(9.8%) 1030000(1st yr) 1030000 1107250(2nd Yr) 1008424 1279566(3rd Yr) 987301 1589601(4th Yr) 966620 Total Amount required today = 1030000+1008424+987301+966620 = Rs.3992345 CFP Final Level: Workbook Page 114

Case Study – 3 (Sahanbhuti) (Reference Date: 1st April, 2020) Ms. Sahanubhuti, aged 34 years, is working in Mumbai. She is the sole guardian of her only daughter Shambhavi, aged 12 years, pursuant to the death of her husband Manohar, who died intestate, had no siblings and whose parents had predeceased. She is currently residing in a rented house. Her daughter is studying in the 6th Standard. She has approached you, a CFPCM practitioner, for preparing her Financial Plan. She has shared the following financial information with you: Salary Income (2020-2021) : Annual (₹ lakh) Basic Salary : 12.00 HRA : 7.20 Conveyance Allowance : 3.00 Special pay : 8.98 Variable Salary : 8.00 Employee’s Provident Fund : 1.44 Employer’s Provident Fund : 1.44 Regular Outgoings Basic Household Expenses Monthly (₹) Services availed : 40,000 School Fees : 12,500 House Rent : 12,500 Power, Telecom & Fuel : 35,000 Car Loan EMI : 12,500 Other Monthly & Annual cash outflows : 25,585 SIP – Equity Mutual Fund (Index Fund) SIP – Balanced Mutual Fund : 15,000 (Monthly) Life Insurance Premium16 : 10,000 (Monthly) Health Insurance Premium2 : 54,324 Assets : 27,631 Market Value (₹ lakh) as on 31st March, 2020 1 (Annual – 2 policies/Total Cover Rs.55 lakh) Page 115 2 (Annual – 2 policies/Total Cover Rs.20 lakh) CFP Final Level: Workbook

Equity Mutual Fund portfolio : 32.45 Balanced MF scheme investment : 12.79 Debt MF portfolio : 5.98 Demat Account - Shares : 21.92 Provident Fund : 9.93 Public Provident Fund (PPF) A/c.3 : 6.59 Gold & Diamond Jewellery : 15.75 Car4 : 7.50 Bank (Salary Account) : 2.82 Savings Bank account – Sahanubhuti5 : 33.26 Deposit with House Owner : 3.00 Money Back Insurance Plan6 : 5.00 Liabilities (₹ lakh) As on 31st March, 2020 Car loan : 7.99 You, in consultation with Sahanubhuti, have identified the following financial goals for her family and the preliminary Roadmap to achieve them: 1. Send her daughter to a Boarding School – Immediately – Outlay ₹ 2.40 lakh p.a. (present cost) – for 6 years – To be met on year to year basis – education costs are escalating at 10% p.a. 2. Buy a house – Outlay of ₹ 1.20 crore – Look for a ready-to-occupy house immediately by availing a loan at 60% of value of house. 3. Invest suitably for the Higher Education of Shambhavi – for 5 years - higher education starts after 6 years – present cost ₹ 8 lakh p.a. – such costs are escalating at 10% p.a. 4. To invest monthly for Shambhavi’s wedding when she completes 25 years of age. The estimated present cost of marriage is ₹ 25 lakh, and cost escalation for marriage is 7% p.a. 5. Retirement Corpus at age 60 years – Corpus to sustain an inflation linked income stream for a post-retirement life of 25 years. 6. A World Tour – after 11 years – Outlay of ₹ 12 lakh at current prices, cost escalation of 8% p.a. is expected. 7. A suitable Estate Planning to cover all her physical and financial assets. Assumptions regarding pre-tax returns on various asset classes (1-3 years): 1) Equity & Equity MF Schemes/Index ETFs : 11.00% p.a. 2) Balanced MF Schemes : 9.50% p.a. 3) Bonds/Govt. Securities/Debt MF Schemes : 7.50% p.a. CFP Final Level: Workbook Page 116

4) Liquid MF Schemes : 6.00% p.a. ______________________ 3 Account matures on 1st April, 2026 4 Car purchased out of a loan availed of Rs. 14 lakh on 1st March 2017, interest being charged on reducing monthly balance for a term of 6 years. 5 Includes Rs. 20 lakh received towards life insurance claim of Manohar. 6 Sum Assured of Rs. 5 lakh, Term of 15 years, Annual Premium of Rs. 45,565, Purchased on 18th September, 2015, terms of money back: 15% of SA at the end of 3rd/6th/9th & 12th year and 40% at maturity 5) Gold & Linked Investments : 6.00% p.a. 6) Real Estate Appreciation : 6.50% p.a. 7) Bank/Post Office Term Deposits ( > 1 year) : 7.25% p.a. 8) Public Provident Fund/EPFO : 7.75% p.a. Assumptions Regarding Economic Factors: : 5.00% p.a. 1) Inflation : 5.50% p.a. 2) Expected Return in Risk Free Instruments Cost Inflation Index: 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264 2001-2002 100 2004-2005 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272 2002-2003 105 2005-2006 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280 2003-2004 109 2006-2007 301 2019-2020 289 2020-2021 CFP Final Level: Workbook Page 117

Case Study - 3 (Sahanubhuti) (Reference Date 1st April 2020) (1) Sahanubhuti wants your advice to disclose her professional Income 50% less than the actual to reduce her tax liability in the current year. You advice not to conceal particulars of her Income or furnish an inaccurate particulars of such income, as Penalty payable in addition to tax under section 271(1)c of Income Tax Act ____________ is payable. [2 Marks] A) At the discretion of Commissioner of Income tax B) Minimum 200% of the tax sought to be evaded and maximum 300% of the tax sought to be evaded C) Minimum 100% of the Income sought to be evaded and maximum 300% of the Income sought to be evaded D) Minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to be evaded. (2) Sahanubhuti, in an official conference met a CFPCM Practitioner who was one of his old friends. Both of them were discussing about their professions and businesses and during the talks Sahanubhuti asked for some recommendation on his personal finances from his CFPCM friend. He suggested Sahanubhuti to come to his office and he will provide the recommendations in writing. Sahanubhuti asked, is it important to have it in writing? You as a CFPCM Practitioner explained that all recommendations concerning the financial affairs of a client should be presented in writing because: [2 Marks] 1) It is regarded as best practice under the FPSB India code of ethics and rules of professional conduct. 2) It provides substantial protection to the planner under common laws against any claims arising Thereof. 3) It will not attract the law of contract to determine the civil rights of both the parties. 4) It gives the client the necessary time to fully consider the planner’s recommendations. A) 1, 2 and 4 only B) 2, 3 and 4 only C) 1 and 4 only D) 1, 2, and 3 only CFP Final Level: Workbook Page 118

(3) Sahanubhuti has taken housing loan of ₹50 lakh at fixed rate of interest of 10.5% p.a. The Bank would release loan installments as per the schedule finalized with the Builder. The tenure of loan is 25 years from the date of disbursement of first installment and EMI/revised EMI would be payable a month after the respective release of loan installments. The EMI changes at every stage of the release of installments as if the outstanding loan amount is repayable over the remaining tenure. Sahanubhuti wants to know what would be the EMI payable after the full disbursement of loan amount. She has to pay 20% of the remaining amount on 1st October, 2020and another 20% six months thereafter. The 3rd installment of 30% shall be due on 1st January, 2021 and the final 30% one year thereafter, pursuant to which the possession would be obtained.(5 marks) A) ₹ 55987 B) ₹ 65392 C) ₹ 33500 D) ₹ 47710 (4) The higher education costs per annum are ₹8 lakh at present cost. She starts accumulating funds immediately in a systematic manner every month in an Equity MF scheme. She would switch equivalent funds required for a particular year to debt MF scheme one year in advance. The funds would continue to be accumulated for a period up to the last switch to debt fund. What should be the SIP amount in the equity growth fund? [3 Marks] A) ₹ 59030 B) ₹ 63900 C) ₹ 54621 D) ₹ 15000 (5) Sahanubhuti wants to buy her residential house, as she has received a fabulous offer for a home loan. According to you, which types of insurance she should buy to cover that risk. [2 Marks] A) Life Insurance and disability Insurance B) Disability Insurance and Accidental Insurance C) Householder’s Policy and Home loan Protection plan D) Health Insurance and Life Insurance (6) While entering into a relationship with you, Sahanubhuti assumed that you being a CERTIFIED FINANCIALPLANNERCM practitioner, you are fully able to take care of the execution of all aspects of his Financial Plan, i.e. Taxation, Insurance, Investments, etc. As per FPSB India Code of Ethics, what is the best proposition in this context? [2 Marks] A) This is the right assumption which can be made about all CERTIFIED FINANCIAL PLANNERCM Professionals. CFP Final Level: Workbook Page 119

B) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNERCM Practitioner needs to be disclosed in the beginning, specifically in writing, by the Professional to the client. C) A CERTIFIED FINANCIAL PLANNERCM practitioner can never take care of all aspects of a Financial Plan. D) A CERTIFIED FINANCIAL PLANNERCM practitioner is concerned with only making a Financial Plan and not its execution. (7) Your client sahanubhuti now requires at his retirement age of 60 years a corpus to sustain an annuity of ₹ 60, 000 p.m.(current cost) inflation linked for a post retirement life 25 years up to which she expects to live. You estimated that her goal would be achieved by investing corpus at a return of 8%. Your client apprises you that she would additionally like to start a trust with a donation of ₹1 crore (value then) on his reaching age of 70 years and would bequeath posthumously a further amount of ₹1 crore (value then) for her daughter. She asks you whether this arrangement would be feasible by taking a little more risk while investing the retirement corpus. You estimate by taking 1% additional return than envisaged and opine that shortfall is bequeathing to daughter will be _________? (Take Rate of inflation 5.5%) [5 Marks] A) ₹ 11300 B) ₹ 9320 C) ₹769834 D) ₹ 10600 (8) Sahanubhuti expect to accumulate ₹1crore towards retirement fund. A financial firm advised her to purchase an annuity for a total term of 20 years starting from the retirement, a fixed monthly amount for the initial 10 years and a provision to double the monthly amount in the second 10 year period. If the minimum yield guaranteed in the annuity is 8% p.a. what monthly amount he is expected to receive in the subsequent 10 year period? [4 Marks] A) 111000 B) 129500 C) 119050 D) 123640 (9) Sahanubhuti has a money back policy of sum assured of ₹ 5 lakh for 15 years term and annual premium is ₹ 45,565. In this policy, he will get a 15% survival benefit at the end of 3rd / 6th/9th/12th year of the policy and 40% at maturity along with simple reversionary bonus of ₹ 40 per thousand plus a terminal bonus of 10% of the sum assured. She wants to know the underlying IRR in the policy if standalone term insurance for ₹ 5 lakh is available at an Annual premium of ₹ 1322 for her. According to you it is ________ per annum? [3 Marks] CFP Final Level: Workbook Page 120

A) 4.8128% B) 4.7223% C) 5.9191% D) 6.0120% (10) You advice your client Sahanubhuti to accumulate corpus for world tour. The client already has in Debt MF scheme ₹ 5.98 lakh which you advice to extent to achieve her goal. You advise her to start SIP of ₹ 2000 per month in same fund till her age of 38 years, thereafter increase the same to ₹ 3000 per month till her age of 42. You advise her to switch 25% of outstanding debt fund every year to liquid scheme at end of the age 43 until full redemption at the age of 45. How much she would be able to accumulate? [5 Marks] A) ₹1701867 B) ₹1542300 C) ₹1789050 D) ₹1690200 (11) Sahanubhuti earning 45 lakh and the anticipated increase in the net income contribution to his family is expected to increase by 5% p.a. in her service tenure. Such contribution considers income tax payable in the current year of ₹10.50 lakh and self-consumption of 45% of post-tax income. Considering investment yield of 9% p.a. you calculate the insurance cover to replace his net income contribution to the family for the remaining years of his employment. Currently she has 2 term policies of total cover ₹55 lakh and money back insurance plan of ₹5 lakh. Retirement age is 60.You find she need additional insurance cover of approximately________?[3 Marks] A) ₹26146322 B) ₹25888910 C) ₹35678100 D) ₹15060500 (12) During the financial discussions with Sahanubhuti, you asked her about his income. But sahanubhuti was bit of hesitant in telling his income details to you. Sahanubhuti wants to know the relevance of income in analyzing her insurance requirement. You explained her that her income would be used to determine: [2 Marks] A) The amount of income protection cover required. B) The amount of income premium loading and/or any exclusion applicable to the policy C) What level of income would be required for dependents in the event of premature death? D) What level of income would be required in the event of disability? 1). A and B 2). B and D 3). A, C and D 4). A, B and D CFP Final Level: Workbook Page 121

(13) Sahanubhuti purchased 2,000 equity shares of face value ₹10 each on 10th June 2020 in ABC ltd at ₹60. The company declared 50% dividend with record date being 3rd august 2020. On 20th October 2020, she transferred 1200 shares out of these 2000 share, at 47 per share. She transferred balance 800 shares on 20th December 2020 at ₹25 per share. During FY 2019-20 Sahanubhuti also generated long term capital gain of ₹79, 000 on sale of gold. Determine her capital gain for AY 2020-21? [5 Marks] A) LTCG ₹41400 B) LTCG ₹35620 C) STCG ₹41400 D) STCG ₹45000 (14) Sahanubhuti wants to sell her gold jewelry at current market valuation. Out of such sell she wants to reserve ₹5 lakh for paying new house down payment and remaining for her daughter. This jewelry was bought by her at the price of ₹3 lakh on the 5th June 2014. Sahanubhuti wants to know whether any capital gains tax liability would arise on such sell. [3 Marks] A) ₹145680 B) ₹163640 C) ₹146000 D) ₹142550 (15) Sahanubhuti wants to know which option is better to invest Option1> investment in bank of Rs.2 lacs for 3 years, rate of interest is 10% p.a. Option2 > investment in FMP of mutual fund of Rs.2 lacs for 3 years, rate of interest is 10% p.a. A) Option 1 B) Option 2 C) Both are same D) None of the above CFP Final Level: Workbook Page 122

Additional Questions 1. If Sahanubhuti dies today what insurance she needs to have if she wants that Shambhavi should get 50% of monthly expenses till her marriage and also her boarding school expenses plus her marriage expenses in today’s term. Assume that the claim proceeds are invested in a Debt Fund. A) Rs.6599051 B) Rs.5984756 C) Rs.4527698 D) Rs.6721400 2. In addition to her retirement corpus as per her goal, Sahanubhuti would also like to provide for Rs.10 lakhs (current cost) for charity at her age of 70 years, another Rs. 10 lakhs (Current cost) at the age of 80 years and posthumously another Rs. 20 Lakhs at then cost. Calculate the revised corpus needed. Post retirement investments are done in debt instruments? A) Rs.65424577 B) Rs.37995826 C) Rs.87987605 D) Rs.29442666 3. To build a Retirement corpus, Sahanubhuti wants to invest 1.5 % excess of Risk free return during post retirement. She will use existing equity mutual fund for retirement corpus. She wants to start SIP immediately as per below asset allocation 80% in Equity mutual fund and 20% in Debt mutual fund for 10 years, Beginning of 11thyear, She will rebalance fund as per new asset allocation 60% Equity and 40% Debt for another 10 years. After next five year again she rebalances and asset allocation will be 40% equity and 60% Debt. She will transfer the entire corpus into liquid fund for balance years till retirement. She wants to know SIP amount required till retirement? She expects 2% P.A. Increase in her life style expenses till retirement. A) Rs.3545 B) Rs.4000 C) Rs.5736 D) Rs.7865 4. Sahanubhuti’s father during the financial year 2020-21 has paid medical insurance premium of Rs. 20,000on his health and on the health of his wife. Further, he has also paid Rs. 20,000 to keep in force an insurance policy on the health of his parents, who are Senior Citizens. The eligible deduction under section 80D for her father would be _______. A) Rs. 40,000 B) Rs. 45,000 C) Rs. 30,000 D) Rs. 20,000 CFP Final Level: Workbook Page 123

5. Sahanubhuti wants to invest systematically every month in an Equity Mutual Fund scheme with immediate effect for 11 years, so as to create a corpus for her proposed foreign trip after 11 years from now. Such corpus is withdrawn and reinvested in a Balanced Mutual Fund scheme. She proposes to contribute 40% of the expenses from her regular savings for her first trip, while drawing the balance from the corpus. She asks you to calculate the amount of monthly investment required to achieve that goal. A) ₹4504 B) ₹5678 C) ₹5675 D) ₹6756 CFP Final Level: Workbook Page 124

Solutions Q1 D) Minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to be evaded. Q2 A) 1, 2 and 4 only 50 lakh Q3 D) ₹ 47710 10, 00,000 (Solution given below) 25*12 Loan amount Release of 1st installment on 1st October 2020 10, 00,000 20% of 50, 00,000 294 Term outstanding Release of 2nd installment on 01/04/2021 15, 00,000 20% of 50, 00,000 285 Term outstanding = 300-6 Release of 3rd installment on 01/01/2022 15, 00,000 30% of 50, 00,000 273 Term outstanding = 294-9 Release of last installment on 01/01/2023 10, 00,000 30% of 50, 00,000 300 months Term outstanding = 285-12 10.5% Tenure of the loan is 25 years from 01/10/2020 9441 =release of 1st installment on 01/10/2020 Term outstanding = Rate of interest = EMI from 01/11/2020 to 01/04/2021 Set = End N = 300 I = 10.50% PV = -1000000 CFP Final Level: Workbook Page 125

PMT =? FV = 0 P/Y=C/Y=12 Release of 2nd installment on 01/04/2021 10 lakh Principal outstanding of earlier installment = 995757 (AMRT;PM1=1,PM2=6, solve balance) Total loan outstanding = 995757+10,00,000 19,95757 Term outstanding (Months) 294 Rate of interest 10.50% EMI from 01/05/2021 to 01/01/2022 18923 Set = End N = 294 I =10.50% PV = -1995757 PMT =? FV = 0 P/Y = C/Y=12 =Release of 3rd installment on 01/01/2022 to 15 lakh Principal outstanding of earlier installment 1982138 (AMRT-PM1=1, PM2=9, solve balance) Total loan outstanding 15,00,000+19,82,138 34,82,138 Term outstanding 285 Rate of interest 10.50% EMI from 01/02/2022 to 01/01/2023 33244 Set = End N = 285 I = 10.50% PV = -3482138 PMT = 33244 FV = 0 P/Y = C/Y=12 CFP Final Level: Workbook Page 126

=Release of last installment on 01/01/2023 15 lakh Principal outstanding earlier 3447175 (AMRT-PM1=1,PM2=12,solve balance) Total loan outstanding = 3447175+1500000 4947175 Term outstanding 273 months Rate of interest 10.50% EMI from 01/02/2023 to 01/10/2045 47710 (End, N=273, I=10.50%, PV=-4947175, PMT=47710, FV=0, P/y=12, c/y=12) Q4 C) ₹54621 (Solution given below) As the funds for higher education are required for consecutive years after 6 years and the requisite funds for a particular year are transferred one year prior in the debt fund, the funds transferred from equity fund to debt fund would be 5,6,7,8 and 9years from the now. Thus accumulation in the equity would be for 9 years i.e. up to last switch. =₹ 8 lakh required after 6 years at 8% cost escalation 1417249 = (800000*(1+10%)^6) Amount transferred to debt fund from equity fund a year prior, i.e. year 5= ₹ 1318371 = (1417249/1.075) PV of such fund now if accumulated in an equity fund 782389 (1318371/1+11%^5) =₹ 8 lakh required after 7 years at 8% of cost escalation 1558974 (800000*(1+10%)^7) Amount transferred from to debt fund from equity fund a year prior, i.e. year 6 = ₹1450208 (1558974/1.075) PV of such fund now if accumulated in an equity fund 775340 (1450208/1+11%^6) =₹ 8 lakh required after 8 years at 8% cost escalation 1714871 (800000*(1+10%)^8) Amount transferred to debt fund from equity fund a year prior, i.e. year 7 = ₹1595229 (1714871/1.075) PV of such fund if accumulated in an equity fund 768335 (1595229/1+11%^7) =₹ 8 lakh required after 9 years at 8% cost escalation 1886358 (800000*(1+10%)^9) Amount transferred to debt fund from equity fund a year prior, i.e. year 8 = ₹1754752 (1886358/1.075) PV of such fund now if accumulated in an equity fund 761433 (1754752/1+11%^8) CFP Final Level: Workbook Page 127

=₹ 8 lakh required after 10 years at 8% cost escalation 2074994 Amount transferred to debt fund from equity fund a year prior, i.e. year 9 = ₹1930227 (2074994/1.075) PV of such fund now if accumulated in an equity fund 754574 (1930227/1+11%^9) PV of total funds required to be accumulated 3842071 (782389 +775340+768335+761433+754574) SIP for 9 years to accumulate this amount= 54621 Set = begin N = 9*12 I =11 PV = -3842071 PMT =? (54621) PV= 0 P/y=12, C/y=1 Q5 C) Householder’s Policy and Home loan Protection plan Q6 B) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNERCM practitioner needs to be disclosed in the beginning, specifically in writing, by the professional to the client. Q7 C) ₹769834 (Solution given below) Expense required after retirement, inflation-linked 60, 000 P.m. Rate of return 8% Inflation 5.5% Real rate of return 2.3697% Current age of Sahanubhuti 34 years Retirement age 60 years Life expectancy 85 years Expense in the 1st month after retirement 241388 (60000*1+5.5%^26) Retirement corpus to be accumulated 54866067 (Begin, N=25*12, I=2.3697, PV=? (54866067), PMT=241388, FV=0, P/y=12, C/y=1) CFP Final Level: Workbook Page 128

Additional 1% return targeted at 9% Revised RRR 3.3175% Revised corpus needed for expense 49571557 (Begin, N=300, I=3.3175, PV=? PMT=241388, FV=0, P/y=12, C/y=1) Additional corpus each provisioned 10000000 Additional corpus for ₹ 1 crore at 70 years 4224108 (10000000/ (1+9%) ^10) Additional corpus of ₹ 1 crore at 85 years 1159678 (10000000/ (1+9%) ^25) Revised corpus needed to meet goals 54955343 (49571557+4224108+1159678) Additional funds required at retirement to fund 89276 post retirement goals (54955343-54866067) Alternatively if the funds are not arranged the shortfall 769834 expected in bequeathing to her daughter would be (89276*(1+9%) ^25) Q8 D) ₹123640 (Solution given below) Amount of Retirement fund accumulated for annuity 10000000 Total term 20 years Yield minimum expected from annuity 8% Suppose the monthly annuity begin with 100 PV of the amount at the age 60 (60-70) 8397 Set = Begin N = 10*12 I = 8% PV =? PMT = -100 FV = 0 P/Y=12, C/Y=1 Monthly annuity Double in the subsequent 10-year annuity PV of amount at the age 70 (70-80) 16794 N = 10*12 CFP Final Level: Workbook Page 129

I = 8% PV =? 16793 PMT = -200 FV = 0 P/Y=12, C/Y=1 PV of the amount at the age of 60 7779 (16794/1.08^10) Total amount required at the age of 60 16176 (8397+7779) Amount of monthly annuity in the initial period 61820 (100*10000000/16176) Therefore, amount in the subsequent 10-year period 123640 (61820*2) Q9 B) 4.722% (Solution Given Below) Annual premium ₹ 45565 Sum assured ₹5 lakh Term 15 years Term premium ₹ 1322 Survival benefits after 3years/6 years/9 years/12 years = 15% of sum assured = 75000 Annual effective investment = 45565-1322 ₹ 44243 Maturity amount = 40% of S.A + reversionary bonus (40/1000*500000*15) + terminal bonus (10% of 500000) = 200000+300000+50000 ₹ 550000 To calculate the IRR, we use “CASH” function 1 = -44243 2 = -44243 3 = -44243 4 = 30757(75000-44243) 5 = -44243 6 = -44243 7 = 30757(75000-44243) 8 = -44243 9 = -44243 10 = 30757(75000-44243) 11 = -44243 CFP Final Level: Workbook Page 130

12 = -44243 13 = 30757(75000-44243) 14 = -44243 15 = -44243 16 = 550000 Solve IRR = 4.722% Q10 A) ₹1701867 (Solution Given Below) Current amount of world tour ₹ 12 lakh Cost escalation 8% Inflated amount after 11 years ₹ 2797967 (1200000*1.08^11) Amount outstanding as on 01/04/2020 Debt fund ₹ 5.98 lakh Rate of return on debt MF 7.5% Liquid MF 6% Balance at age 38 ₹ 910274 (Begin, N=4*12, I=7.5%, PV=-598000, PMT=-2000, FV=? , P/y=12,C/y=1) Balance at age 42 ₹ 1383137 (Begin, N=4*12, I=7.5%, PV=-910274, PMT=-3000, FV=?, P/y=12,C/y=1) Balance at age 43 ₹ 1486872 (1383137*1.075) One fourth is redeemed and invested in liquid scheme at this stage, i.e. at 43 years =Balance at age 44 years in liquid scheme ₹394021 (371718*1.06) Balance at age 44 in debt fund scheme ₹1198791 (1486872*3/4)*(1+7.5%) =Balance at age 45 years in liquid scheme ₹735342 (394021+1198791/4)*(1+6%) Balance at age 45 years in debt scheme ₹966525 (1198791*3/4)*(1+7.5%) Corpus accumulated for the world tour at the age of 45 966525+735342 =₹ 1701867 CFP Final Level: Workbook Page 131

Q11 A) ₹ 26146322 ₹45 lakh (Solution Given Below) ₹10.5 lakh Gross salary per annum ₹3450000 Tax paid ₹1897500 Net income in current year = 4500000-1050000 26 years Income contribution to the family 9% Remaining work life 5% Investment yield ₹ 32146322 Expected rate in increase in salary PV of future income ₹ 60 lakh Set = Begin ₹ 32146322-6000000 N = 26 ₹ 26146322 I = 3.8095% PV =? ₹56, 400 (1200*47) PMT = -1897500 ₹72 000 (1200*60) FV = 0 ₹-15600 (56400-72000) P/Y-C/Y=1 ₹6000 (0.50*10)*1200 Sum assured (term + money back) Additional insurance cover required = Page 132 Q12 3) A, C and D Q13 A) LTCG ₹ 41400 (Solution given below) For 1200 shares Sale consideration (on 20th October 2020) Less; - cost of acquisition (on 10thJune 2020) Short term capital loss (STCL) Dividend received Section 94(7) is applicable CFP Final Level: Workbook

For 800 shares ₹20000 (800*25) Sale consideration (on 20th December 2020) ₹48000 (800*60) Cost of acquisition (on 10th June 2020) ₹-28000 (48000-20000) Short term capital loss (STCL) ₹4000 ((0.50*10)*800) Dividend received Section 94(7) is not applicable ₹79000 LTCG on sale of gold ₹9600 (15600-6000) Less; - STCL on sale of 1200 shares ₹28000 Less; - STCL on sale of 800 shares ₹41400 (79000-9600-28000) Net LTCG for AY 2020-21 ₹376250 (300000*301/240) Q14 B) ₹163640 ₹1575000 (Solution Given Below) ₹1198750 Indexed cost of acquisition ₹500000 Sales consideration ₹380555 LTCG (1198750*500000/1575000) Invested in new house ₹818194 (1198750-380555) LTCG exempted ₹163639 (818194*0.20) Taxable LTCG Tax on LTCG Or ₹ 163640 (round off) Q15 B Option 2 (Solution Given Below) In option 2 investor gets indexation benefit and will pay only 20% tax. But in option 1 maturity amount will be less than FMP as TDS will be deducted every quarter and balance amount is invested. Besides it interest will be taxed at 30%. CFP Final Level: Workbook Page 133

Additional Solution Q1 A) Rs. 6599051 Current Monthly household exp 40000 p.m. 480000 p.a. 50% for Shambhavi 20000 240000 p.a. Present Age of Shambhavi 12 Marriage Age of Shambhavi 25 Debt Fund Rate 7.5% Inflation Rate 5% PV of household expenses (CMPD; N=13,I=2.38..,PMT=240000, FV=0,P/Y=C/Y=1,PV=solve)=2719703 PV of boarding school expenses (CMPD;N=6,I=-2.272…., PMT=240000,FV=0, P/Y=C/Y=1,PV=solve)=1526363 Today’s marriage expense 2500000 Marriage inflation rate 7% FV of marriage expense 6024613 (N=13, I=7, PV=-2500000, PMT=0, FV= Solve) PV of marriage expense 2352985 (N=13, I=7.5, PV=-Solve, PMT=0, FV= 6024613) Total insurance cover = 2719703+1526363+2352985 = Rs.6599051 Q2 B) Rs.37995826 Retirement age 60 post retirement life 25 Current expenses(Yearly) 40000x12=480000 current age 34 Inflation 5.00% Debt return 7.50% Real rate of return 2.380…% FV of household expenses at 60 1706723 CMPD;N=26, I=5, PV=-480000, PMT=0, P/Y=C/Y=1, FV=solve(1706723) Retirement corpus required at 60 32636766 CMPD;N=25,I=RRR(2.380…), PV=solve(-32636766), PMT=1706723,FV=0, P/Y=C/Y=1) FV of charity at 70 5791816 CMPD;N=36, I=5, PV=-1000000, PMT=0,FV=solve(5791816), P/Y=C/Y=1 PV of charity at 60 2810154 CFP Final Level: Workbook Page 134

CMPD;N=10, I=7.5, PV=solve(-2810154), PMT=0,FV=5791816, P/Y=C/Y=1 FV of another charity at 80 9434258 CMPD;N=46, I=5, PV=-1000000, PMT=0,FV=solve(9434258), P/Y=C/Y=1 PV of another charity at 60 2220948 CMPD;N=20, I=7.5, PV=solve(-2220948), PMT=0,FV=9434258, P/Y=C/Y=1 PV of estate goal (2000000) at 60 327958 CMPD;N=25, I=7.5, PV=solve(-327958), PMT=0,FV=2000000, P/Y=C/Y=1 Hence retirement corpus = 32636766+2810154+2220948+327958 = Rs.37995826 Q3 C)₹5736 Current age 34 Retirement age 60 Life expectancy 85 Total inflation till retirement 5+2 = 7% Current expenses 40000x12=480000 Expense at age 60 2787529 CMPD;N=26, I=7, PV=-480000, PMT=0, P/Y=C/Y=1, FV= solve(2787529) Retirement corpus required at 60 56083908 CMPD;N=25, I=1.904… , PV=solve(-56083908), PMT=2787529, P/Y=C/Y=1, FV= 0 FV of equity mutual fund 48934161 Shortfall = 56083908 – 48934161=7149747 Suppose monthly investment begin with Rs.100 Ratio of Equity and debt for 10 years 80:20 FV of equity investment after 10 years 16994 CMPD;N=10x12, I=11, PV=0, PMT=-80, P/Y=12, C/Y=1, FV= solve(16994) FV of debt investment after 10 years 3532 CMPD;N=10x12, I=7.5, PV=0, PMT=-20, P/Y=12, C/Y=1, FV= solve(3532) Total FV after 10 years = 16994+3532 = 20526 Ratio of Equity and debt for next 10 years 60:40 FV of equity investment after next 10 years 47714 CMPD;N=10x12, I=11, PV=-20526x.60, PMT=-60, P/Y=12,C/Y=1, FV= solve(47714) FV of debt investment after next 10 years 23985 CMPD;N=10x12, I=7.5, PV=-20526x.40, PMT=-40, P/Y=12, C/Y=1, FV= solve(23985) Total FV after 20 years = 47714+23985=71699 Ratio of Equity and debt for next 10 years 40:60 FV of equity investment after next 5 years 51491 CMPD;N=5x12, I=11, PV=-71699x.40, PMT=-40, P/Y=12, C/Y=1, FV= solve(51491) FV of debt investment after next 5 years 66110 CMPD;N=5x12, I=7.5, PV=-71699x.60, PMT=-60, P/Y=12, C/Y=1, FV= solve(66110) CFP Final Level: Workbook Page 135

Total FV after 25 years = 51491+66110=117601 Total FV after 26 year = 117601x1.06=124657 SIP required = (7149747x100)/124657= ₹5736 4. A) 5. D) Cost of world tour today ₹1200000 Cost after 11 years from now ₹2797967 CMPD;N=11, I=8, PV=-1200000, PMT=0, P/Y=1, C/Y=1, FV= solve(2797967) 60% of these expenses 2797967x0.60 = 1678780 Monthly investment required ₹6756 CMPD;N=11x12, I=11, PV=0, PMT=solve(-6756), P/Y=12, C/Y=1, FV= 1678780 CFP Final Level: Workbook Page 136

Case Study – 4 (Mahesh & Neelam) (Reference Date: 1st April, 2020) Mahesh and Neelam approached you, a CFPCM practitioner for preparing a Financial Plan to achieve their financial goals. Mahesh, aged 45 years, is working in Bengaluru for an MNC, at a managerial level. His wife Neelam, aged 42 years, is working in a Private Company and has gross income of ₹ 5 lakh p.a. The gross salary of both Mahesh and Neelam is likely to grow at 7% p.a. They are married for 22 years now. The couple has two children - daughter Sapna, aged 18 years, pursuing her Graduation in Economics, and son Varun, aged 16 years, studying in 12th standard. Sapna intends to pursue her post- graduaton and doctorate in economic sciences from a foreign educational institution. Varun has inclination to become a Doctor. The family’s monthly household expenses are ₹ 60,000 excluding EMI on loans and Insurance premiums. Mahesh’s family along with his mother are currently staying in a house which was owned by his father, who passed away in December 2019. The house is valued at₹ 75 lakh today. Mahesh has a term insurance of₹ 50 lakh (for 20 years, annual premium ₹ 13,985), the term expires 15 years from now. Both are covered under Group Medical Insurance by their respective employers. They additionally have a ₹ 10 Lakh family floater policy (annual premium ₹ 20,386 paid by Mahesh). Salary Breakup of Mahesh for FY 2020-21 Components Annually (₹) Basic 7,16,000 House Rent Allowance 1,80,000 Dearness Allowance 2,50,000 Transport Allowance 96,000 Medical Reimbursement 15,000 Entertainment Allowance 60,000 Total 13,17,000 The couple’s assets as on 31st March 2020 Page 137 1. Cash in Hand ₹ 50,000 2. Bank balance ₹ 2,50,000 3. Diversified Equity Mutual Fund units at market value ₹ 12.78 lakh 4. Equity Shares at market value ₹ 25.83 lakh CFP Final Level: Workbook

5. Debt Mutual Fund units at market value ₹ 12.17 lakh 6. PPF A/c balance ₹ 8.25 lakh (Mahesh), ₹ 3.15 lakh (Neelam), both maturing on 1st April 2024 7. ELSS Mutual Fund scheme (growth option), ₹ 75,000 invested on March 20, 2018 at NAV ₹ 14.81 and ₹ 75,000 invested on February 3, 2020 at NAV of ₹ 16.95. The current NAV is ₹ 16.26 per unit. 8. A separate house in joint ownershipof Mahesh and Neelam with respective shares of 75% and 25%. This house has two floors and is let out for rent of ₹ 12,000 p.m. each floor Present Market Value of this House is ₹ 1 crore ( Mahesh and Neelam had jointly taken a housing loan of Rs. 30 Lakh in the ratio of their ownership of the house which cost them Rs. 47.50 Lakh on 1st April 2013. The loan is for 15 years at a fixed rate of interest of 9.25% p.a. They pay EMI proportionate to their ownership on the last day of every month 9. Gold Ornaments at market value ₹ 8.35 lakh 10. Car at market value ₹ 2.60 lakh 11. 100 units of Sovereign Gold Bonds of 8-year maturity subscribed on 28th December 2019 at ₹ 2987 per unit; market price quoted on 31st March 2020 is ₹ 2861; interest @ 2.50% p.a. payable semi-annually on 30 June and 31 December 12. Government Securities (Gilt) MF Scheme; open ended scheme; Invested ₹ 4 lakh in New Fund Offering on 23rd March 2018; NAV on 31 March 2020 is 12.642 13. Money back insurance plan of 20 year term on the life of Mahesh with sum assured of ₹ 5 Lakh (Annual premium Rs. 28,875, due in March every year, paid 16 premiums. The policy provides 25% of basic sum assured each on expiry of 5th, 10th, 15th years, and on maturity of the policy. (Reversionary Bonus accrued: Rs. 2,43,100) 14. Unit linked insurance plan (aggressive allocation; 70% to equity) of 10 years in the name of Mahesh with sum assured of ₹ 5 lakh (Annual premium of Rs. 35,000 p.a. due in end of April every year; six installments paid till date, this year premium due. (current unit balance 15,554.221 units, NAV: Rs. 16.56 per unit) Liabilities as on 31st March 2020 : ₹ 20.89 Lakh Housing loan outstanding Goals & Aspirations 1) Plan for Varun’s medical education expenses for 6 years, beginning a year from now, estimated to be annually ₹ 10 lakh (current costs) with cost escalation at 8% p.a. 2) Plan for Sapna’s Post Graduation from abroad after three years, estimated to cost lump sum ₹ 75 lakh (current costs) cost escalation at 10% p.a. CFP Final Level: Workbook Page 138

3) Create a separate fund to provide holiday expenses annually throughout their retired life, amounting to ₹ 75,000 in current terms and escalating at 7% p.a. 4) To accumulate funds for marriage of Varun and Sapna. At current costs, they will require ₹ 10 lakh and ₹ 15 lakh respectively for the marriages of Varun and Sapna when they individually reach 28 years of age; such expenses escalate at 7% p.a. 5) Build a retirement corpus for inflation-adjusted current household expenses, retirement on Mahesh’s age of 60 years, expenses required till Neelam’s survival. Life Expectancy Mahesh : 80 years Neelam : 82 years Assumptions regarding pre-tax returns in various asset classes: 1) Equity & Equity MF schemes/ Index ETFs : 11.00% p.a. 2) Balanced MF schemes : 9.50% p.a. 3) Bonds/Govt. Securities/ Debt MF schemes : 7.50% p.a. 4) Liquid MF schemes : 6.00% p.a. 5) Gold and linked investments : 6.00% p.a. 6) Real Estate appreciation : 6.50% p.a. 7) Bank/Post Office Term Deposits ( > 1 year) : 7.25% p.a. 8) Public Provident Fund/EPFO : 7.75% p.a. Assumptions regarding economic factors: 1. Inflation : 5.00% p.a. 2. Expected return in Risk free instruments : 5.50% p.a. Cost Inflation Index: 2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264 2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272 2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280 2019-2020 289 2020-2021 301 CFP Final Level: Workbook Page 139

Case Study - 4 (Mahesh & Neelam) (Reference Date: 1stApril 2020) Q1 You have explained Mahesh that while underwriting the Insurer may counter the effects of ____________ insurers (to the extent that laws permit) ask a range of questions and may request Medical or other reports on individuals who apply to buy insurance, so that the price quoted can be Varied accordingly, and any unreasonably high or unpredictable risks rejected. (2 Marks) A) Moral Hazard B) Morale Hazard C) Adverse Selection D) Uberrimae fidei Q2 Prior to providing any Financial Planning services, you a Financial Planning practitioner and Mahesh, as your client shall mutually define the scope of the engagement. The letter of engagement would define the scope of engagement by discussing (2 Marks) i) Identification of the service(s) to be provided ii) Financial Planning practitioner’s compensation arrangement(s) iii) Analysis and evaluation of client’s current situation iv) Determining the clients and the Financial Planning practitioner’s responsibilities; v) Establishing the duration of the engagement; vi) Determine the strategies to achieve financial goals A) i), ii), iv) and v) B) ii), iii), iv) and vi) C) i), ii), iii), iv) and v) D) i), ii), v) and vi) Q3 You suggest Mahesh to achieve the goal for accumulation of funds for marriage expenses by starting a monthly SIP immediately along with the lump sum of ₹5 lakh from existing funds available in an aggressive fund for 7 years and shift to debt investments 3 years prior to daughter marriage. What is approximate monthly investment required? (3 Marks) A) ₹25719 B) ₹22289 C) ₹33268 D) ₹45259 Q4 Due to Global Equity Market condition Mahesh is not satisfied with the return generated by ULIP. He want to surrender his ULIP. A premium allocation charges applicable in the policy is 20% for the first 4 years, 10% for the remaining yea₹ Mortality charges of ₹ 1.95 per thousand, sum assured of 5 lakhs and administrative charges ₹750 P.A charged in the beginning of the year from the fund value and is fixed for the whole term of the policy. Fund management charges 1.75% of CFP Final Level: Workbook Page 140

closing fund value is deducted at the end of every year. He wants to know from you what should be the surrender value of his policy. He had opted for aggressive. ULIP has given 9% return in Aggressive option and 6% return in debt option since inception of policy. (5 Marks) A) ₹209514 B) ₹220300 C) ₹240300 D) ₹210300 Q5 Mahesh wants to sell his current holding of gold ETF on the prevailing price of ₹2415 per unit. If all units are sold at the sale price prevailing on 2nd April 2020, what would be the post-tax gains in this transaction for AY 2021-22? And also calculate the return obtained on investment. (3 Marks) A) 10.27 % B) 10.85% C) 10.96% D) 10.98% Q6 You observed that your client has some life insurance cover. He tells you that future living expenses of his family must be insured along with his essential goal of medical/post-graduation of his son and daughter. You suggest the client that the aggregate insurance cover should suffice to meet education expenses when due, along with inflation adjusted living (household) expenses to the extent of 80% of their current expenses for immediate next 10 years and 50% for the succeeding 23 yeas. You compute the additional insurance cover amount needed which comes to ____. (4 Marks) A) ₹1.85 crore B) ₹1.2crore C) ₹1 crore D) ₹90 lakhs (Assume 7.5% rate of return is expected for the funds to be invested) Q7 As part of the retirement strategy, you advise client to invest a sum of ₹40 000 and ₹20000 immediately in his and spouse's PPF account respectively and increase this investment by 20% every year in the beginning of the financial year in all future years till normal maturity. The contributions are rounded up to the nearest thousand. You also advise to extend their respective accounts for two terms of 5 years each beyond the normal maturity by contributing maximum permissible amounts in both the accounts. Further extension till retirement without contribution. Find the combined corpus of accounts when the client retires. (Maximum subscription amount per year is ₹1, 50, 000). (5 Marks) A) ₹9354206 B) ₹8979990 C) ₹8700000 D) ₹9800000 CFP Final Level: Workbook Page 141

Q8 Mahesh has started investing ₹30, 000 p.a. in a 10% p.a return instrument with immediate effect, and increase the contribution by 20% every year of the prior year investment amount. Consider accumulated corpus in PPF in previous question. If the expenses post retirement are curtailed by 50%, what maximum inflation would sustain his corpus till he survives, if the corpus is invested at 7% p.a.? (Take lifestyle inflation 1.75% above the normal inflation only in pre-retirement period). (4 Marks) A) 2.41% B) 1.71% C) 9.97% D) 9.14% Q9 Mahesh approaches you with 500000 stating that he would like to develop a financial plan and invest in the market. He is investing first time and he would to choose an appropriate account. What is the CFP professional most appropriate course of action? (2 Marks) A) Open a brokerage account with margin B) Determine whether a client has a consumer debt C) Determine whether a client has a sufficient insurance coverage D) Invest in mutual fund for the current financial year Q10 Before finalizing the Financial Plan, Mahesh’s wife tells you that she wants to entrust the estate issues to a solicitor, who is a friend of Mahesh. Which of the following is your best stand?(2 Marks) A) Estate issues being substantial in the case, you maintain that the Financial Plan cannot be a Integrated one if the same is outside your purview, hence decline. B) This is permissible subject to such an arrangement finding an explicit mention in the Financial Plan For the said activity. C) This is permissible subject to the advice of the solicitor being integrated into the Financial Plan and Monitored along with the Plan. D) You agree to the arrangement subject to the advice of solicitor made known to you so that you modify the Financial Plan accordingly. Q11 Mahesh and Neelam want to create a separate fund for annual holiday vacation, after his retirement till Mahesh expected life. If annual vacation expenses are withdrawn from the corpus @ 9% p.a. Current cost of vacation is ₹75000 p.a, cost escalating at the rate of 7%. You suggest an investment strategy by investing certain equal amount in the Debt & Equity fund and the double the monthly investment at the every 5 years till his age of 60. He wants to know amount he would invest in the last block of five years? (5 Marks) CFP Final Level: Workbook Page 142