PART-4 CASE STUDIES

Module-VI: Advanced Financial Planning (Exam-V) (Also the Challenge Status Exam) Testing Objectives: The test presents a simulated environment for the candidate to have an understanding of the entire financial situation of a client, the household. The immediate and future cash flow situation, assets and liabilities, financial goals of the client to meet in the near and long term, the parameters related to the economy, the market and life are all considered in arriving at appropriate solutions. The emphasis is on recognizing the laid down strategies as possible alternatives to seek the most appropriate solutions. The strategies outlined present the situation before a prospective financial planner to assess and analyze the given information within the ambit of certain constraints and look out for possible opportunities. Also envisaged is the critical evaluation of the strategies for the desired pathway to a financial plan as well as the development of alternative strategies to modify the plan. Learning Objectives: The candidate pursuant to qualifying in this exam shall be eligible to receive CFPCM certification subject to the fulfillment of the experience criterion and the adherence to laid down Code of Ethics and Professional Responsibility. Post certification, the candidate shall be entitled to work as CFPCM professional preparing, executing and reviewing financial plans of the clients. Thus, a candidate should be able to enter into an engagement with a client to provide services with respect to one or more components of financial planning or a comprehensive financial plan which may include its execution and review as well, under a laid down financial planning process. Exam Pattern: The format of Exam 5: Advanced Financial Planning is the Case Study format where a candidate would be required to solve a set of 30 question items based on any two of a set of case studies. The probable case studies will be displayed on FPSB India’s website at least 7 days prior to a candidate’s scheduled date of exam. Any two of these case studies would appear (in random selection) for every candidate who logs in to appear in the examination. A total of fifteen question items are based on each case study and shall be in the following pattern distributed over five parts: Exam-5: Pattern of Questions in each Case Study Part-I Part-II Part-III Part-IV Part-V No. of Marks No. of Marks No. of Marks No. of Marks No. of Marks Items Items Items Items Items 22 4 1 2 0 0 1 2 1 2 31 3 1 3 1 3 0 0 1 3 Marks Category 0 40 0 1 4 0 0 1 4 0 5 0 0 0 0 1 5 2 10 1 5 Total 3 7 3 9 2 8 4 16 3 10 Items per Case Study: 15/Total Marks per Case Study: 50 Total items:30 Total Marks: 100 Cut Score / Pass marks: 50 marks or 50% 1

Exam duration: 4 hours Detailed Testing of Competency over Various Components: Each case study would be followed by a set of 15 question items spread over 5 distinct parts (above matrix) covering various financial planning components. The distribution of these items over the marks-categories of 2, 3, 4 and 5 marks constitutes the weights of these components in Advanced Financial Planning. These marks categories are broadly ordained to signify as follows which are their testing criteria. Also given alongside is these categories‟ total weight per case study. Marks Significance Grade Total Total Weight Category Items Marks % 2-Marks Theoretical testing knowledge ‘Grade 1’ 20% 3-Marks Theoretical testing clarity of concepts or ‘Grade 2’ 5 10 24% Numerical testing basic skills 4 12 4-Marks Numerical testing analytical skills ‘Grade 3’ 16% 5-Marks Numerical testing advanced analytical ‘Grade 4’ 2 8 40% skill, strategy evaluation & synthesis. 4 20 100% Total 15 50 As can be seen from above and reiterated here is the relatively much higher bias towards testing analytical aptitude and strategic thinking requiring synthesis of various goals of a client in a unified financial plan. The pattern of exam affords a candidate a spreadsheet based computation and analysis including scenario analysis with enough time to execute each such question as a separate financial goal of the subject. The complexity and difficulty level of question items from 2-mark to 5-mark items would also involve time consumption individually to justify four-hour duration of Exam 5. The expected time consumption of on an average 90 seconds each in 2-mark items, 3 minutes each in 3-mark items, 10 minutes each in 4- mark items and 15 minutes each in 5-mark items, which is desired of a candidate possessing enough knowledge, technical skills and strategic thinking to be on the verge of being a professional making and executing financial plans, would justify the allotted duration to complete Exam 5. Enough time is also provisioned to link the question items to the case study, understand the subject household’s financial goals, strategies adopted and available resources to arrive at the most appropriate alternatives. 2

Case Study – A (Reference Date: 1st April, 2019) Ashwin, aged 34 years, is employed with an oil exploration company since December 2003. He is an engineer by profession and is part of project team that manages oil rigs worldwide. He has to tour extensively in different parts of the world in connection with the company’s projects. He has approached you, a CFPCM practitioner, for preparing his Financial Plan. He is staying in his own house at Vadodara. His wife Sumedha, aged 31 years, is working in a private sector bank as Manager. They have a son Prateek aged 4 years, and a year old daughter Aslia. The family’s monthly house hold expenses are ₹70,000 p.m. (excludes EMI on loans and insurance premium). Ashwin’s parents stay in their ancestral house at Bikaner. His father is engaged in a small business. Ashwin however supports his parents financially to the extent of ₹ 10,000 p.m. Ashwin’s Monthly Salary (FY 2019-2020) : ₹ 60,000 Basic Salary : 50% of Basic salary Dearness Allowance1 : ₹ 15,000 House Rent allowance : ₹ 7,500 Transport Allowance : Actual expenses up to ₹ 1,250 per month Medical Reimbursement : ₹ 7,500 Entertainment Allowance : 12% of Basic Salary PF & Superannuation Sumedha’s Monthly Salary (FY 2019-2020) : ₹ 40,000 Basic Salary : 30% of Basic salary Dearness Allowance : ₹ 10,000 House Rent allowance : ₹ 1,600 Transport Allowance : ₹ 7,500 Executive Allowance : 12% of Basic Salary PF & Superannuation Couple’s Assets & Liabilities (As on 31st March, 2019) Assets: House : ₹ 75.00 lakh (Municipal Value) ₹ 3.50 lakh (Depreciated Value) Car : ₹ 6.20 lakh (Account balance in Ashwin’s name) PPF (maturity on 1st April 2026) : 1 100% of DA received forms part of salary for retirement benefits. DA not part of PF Contribution. 3

Insurance – Money Back policy2 : ₹ 4.00 lakh (sum assured) Child Plan – Life Insurance3 : ₹ 20.00 lakh (Sum Assured) Gold Ornaments : ₹ 6.50 lakh (Valued 22 karat less 10%) Sovereign Gold Bonds4 : ₹ 2.90 lakh (quoted value) Equity Mutual Fund Scheme5 : ₹ 11.87 lakh Balanced Mutual Fund Scheme : ₹ 3.28 lakh Debt Mutual Fund Scheme6 : ₹ 7.67 lakh Portfolio of Equity Shares : ₹ 18.32 lakh Term deposits : ₹ 3.50 lakh (in Sumedha’s name) Cash/Bank Balance : ₹ 2.25 lakh (Cumulatively in accounts of Ashwin & Sumedha) Liabilities: : ₹ 15.40 lakh (Principal Outstanding) Home loan7 : ₹ 2.77 lakh (Principal Outstanding) Car Loan8 Goals: 1. To provide for higher education of Prateek and Aslia. The expenses, at current cost, required for each child for 4 years; ₹ 8 lakh at their respective age of 18, and ₹ 3 lakh p.a. for 3 subsequent years; cost escalation 8% p.a. 2. Marriage expenses of ₹ 20 lakh (current cost) for each child at their respective age of 27 years which increases 8% p.a. 3. Retirement corpus at Ashwin’s age of 60 to sustain the same lifestyle till their expected life time. 4. A bigger house 3 year from now, valued at ₹ 1.40 crore today. 5. To start building a separate dedicated fund for annual vacation expenses of ₹ 2 lakh (current cost) to be utilized during 15 years to Ashwin’s retirement; cost escalation 8% p.a. 2 Ashwin purchased the 20-year policy on 18th November, 2012; annual premium ₹ 26,864; 20% of sum assured (SA) payable on survival each on expiry of 5th, 10th and 15th years and 40% of SA payable with accrued bonuses on survival of the term 3 Purchased by Ashwin on the life of Prateek on his 3rd birthday for a term of 20 years; annual premium ₹ 44,347 4 Sumedha purchased 100 units @Rs.3,150 in September 2018 Series, maturity date 30-Sep-2026, coupon @2.75% p.a. payable half-yearly on 30-Mar and 30-Sep every year. 5 Four schemes out of which one is diversified large cap growth fund (Rs. 5.71 lakh), one is mid-small cap fund (Rs. 3.83 lakh), and two are sector specific funds on Banking (Rs. 1.26 lakh) and Information Technology (Rs.1.07 lakh). 6 Two schemes, one is short term debt fund in Growth option (current value Rs. 2.59 lakh) acquired through Rs. 10,000 monthly SIP continued for 2 years, the last SIP on March 1, 2017; the other is Gilt fund subscribed in New Fund Offering (May 20, 2016) for Rs. 2 lakh in Growth option with further contributions of Rs. 1 lakh each on Feb 11, 2017 and on June 17, 2018 7 Home loan of Rs. 20 lakh taken on 1st November, 2013 to acquire a house of 1050 sq.ft. built up area valued at Rs. 40 lakh then. Loan details: fixed interest of 8% p.a., tenure 15 years, first EMI paid on 1st December, 2013. Loan shared in 60:40 ratio, major share by Ashwin 8 Car loan of Rs. 5 lakh taken on 1st April, 2017 at a fixed interest of 11% p.a. for a 4-year term. First EMI paid on 1st April, 2017. 4

Life Parameters: : 80 years Ashwin’s Expected Life : 82 years Sumedha’s Expected Life 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 & Gold ETF : 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 5

Case Study - A (Ashwin) Reference Date 1st April 2019 (1) Ashwin wants to know the amount needed by him to buy the new house after 5 years. This could be done by utilizing the net amount from the sale proceeds of his existing house after 5 years. After deducting the outstanding loan amount and a sum of ₹ 10 lakh towards meeting capital gains tax liability on existing house and furnishing expenses of new house. [3 marks] A) ₹ 1.03 crore B) ₹ 84 lakhs C) ₹ 1 crore D) ₹ 1.08 crore (2) You give a quick look at the assets and liabilities of the couple, and before drawing a comprehensive picture of adequate insurance protection and a strategy to achieve the same, you suggest to take cover on an immediate basis, which is _______. [2 marks] A) They must take Mortgage Redemption Insurance or an equivalent term insurance to cover. Their outstanding loans B) They must take Accident Insurance C) They must take Critical illness insurance D) They must take Unit Linked Insurance Policies for their financial goals (3) Calculate Net worth of Ashwin and Sumedha, Considering financial assets only. [3 Marks] A) ₹ 3782000 B) ₹ 5599000 C) ₹ 1817000 D) ₹ 2655000 (4) You compute the value of additional life cover ( ignoring child plan) for Ashwin by considering current household expenses, required inflation adjusted to the extent of 70% until Sumedha age of 55 years and 50% of then expenses for the remaining period of her expected life by considering investment in debt MF schemes. This cover required comes to ______. [3 marks] A) ₹ 2 crore B) ₹ 1 crore C) ₹ 1.40 crore D) ₹ 1.55 crore (5) Ashwin requires Education expenses for each child at their respective age of 18 (₹ 8 lakh at current cost) and for three subsequent years (₹ 3 lakh p.a. at current cost). Expenses escalate at 8% p.a. All withdrawals are made in the beginning of the financial year. What monthly amount is 6

to be invested in equities with immediate effect up to one year prior to the required expenses for the First Child to achieve this goal? (5 Marks) A) 21800 B) 27000 C) 26553 D) 25223 (6) For accumulating funds for the goal of annual vacations, you suggest, a lump sum investment of ₹ 15 lakh and further investment of ₹ 3lakh annually increasing by 25% every year from next year till 7th year. The amount accumulated from this fund is switched to risk free instrument 3 years prior to the actual usage for the purpose. What return would be needed by Ashwin from the asset allocation fund to achieve the goal? [4 marks] A) 15% B) 16% C) 9 % D) 10% (7) Towards the marriage goal of the children, you suggest Ashwin to make maximum permissible subscriptions to his PPF account towards the end of every financial year and extend the account thrice beyond initial maturity for terms of 5 years each with similar subscriptions. The fourth term is maintained without further contribution. Ashwin shall withdraw about 50% of accumulation for the marriage expenses of Prateek and the remaining for the marriage expenses of Aslia. What are the expected individual withdrawals and shortfalls in meeting the marriage expenses? ( Assuming marriage expenses escalates @ 8% p.a. ) [5 marks] A) Pratik ₹ 53 lakh, 39% shortfall; Aslia ₹ 33 lakh 70% shortfall B) Pratik ₹ 63 lakh, 38% shortfall; Aslia ₹ 33 lakh 70% shortfall C) Pratik ₹ 60.7 lakh, 48% shortfall; Aslia ₹76 lakh 49% shortfall D) Pratik ₹ 54 lakh, 39% shortfall; Aslia ₹ 33 lakh 70% shortfall (8) Calculate Ashwin income tax liability for AY 2020-21. If he contributes maximum permissible contribution to his PPF account. Also, he pays 5000 p.a. Health Insurance premium for his dependent brother, 20000 p.a. for health insurance for his family and 30000p.a for his parents who are not senior citizen he earns interest of 10500 on his savings bank account and 90000 (net) on the fixed deposits during FY 19-20. [5 Marks] A) ₹ 99040 B) ₹ 18540 C) ₹ 17480 D) ₹ 182280 7

(9) Ashwin invested in shares of XYZ ltd on 12th October 2016 ₹35 below its Face Value. He received Dividends of ₹20 per share, ₹30 per share on 8th December 2017 and 30th November 2018 respectively. If he sells the entire holding of shares at the par value today, what returns would he have got from this transaction? [3 Marks] A) 46.5% B) 45.6% C) 44.6% D) 46.6% (10) Ashwin saw the acronym CFPCM against your name in your business card. He wants to know about the same. You tell him that ________. [2 Marks] A) CFP marks are owned outside the US by US based FPSB Ltd B) FPSB India is the owner of CFP marks within Indian Territory C) The US based FPSB Ltd. is licensed globally to administer CFP marks D) The US based FPSB Ltd. and FPSB India are respectively licensed to issue CFP certification in US and India (11) Ashwin wants to know what the most appropriate instrument is/are to replicate exactly the equity market returns over a sufficiently long period with the least cost and risks. [2 Marks] (i) Diversified Growth schemes of Mutual Funds (ii) Equity Index Funds (iii) Growth Option of ULIPs (iv) Exchange Traded Funds of Equity Indices (v) A portfolio of Large Capitalized stocks A) (i) and (ii) B) (ii) and (iv) C) (i) and (iii) D) (iv) and (v) (12) As the rates in bank fixed deposits would be headed lower in the near future, you advise Ashwin to invest the FD maturity proceeds in a Mutual Fund scheme investing in long dated Government Securities. Your investment rationale, theoretically, is: [2 marks] A) Invested for more than one year, the debt oriented Mutual Fund scheme would result in tax efficient return, though pre-tax return may match with bank FD. B) With softening interest rates, the price of long dated Government Securities would also fall, thus better yield profile of such securities. C) This is a play on long duration with expected moderate trend in interest rates, thus scheme return though capital appreciation is expected. 8

D) Higher actual income would be expected from the scheme with strengthening yield as the interest rates fall in the future (13) You have advised Ashwin to buy a Term Insurance for his life and also for the life of Sumedha, he wants to know the importance of waiver of premium rider? [2 Marks] 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 the Life 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 (14) You advised Ashwin and Sumedha about the parameters considered post-retirement investment return 8%, inflation 5% and specified longevity while working out retirement corpus. You informed that even marginal fall in expected return or rise in inflation post retirement and a slightly longer life span would adversely impact sustainability of corpus. You worked out the revised corpus by considering 6.5% annual yield, 5.5% inflation and 5 more years to Ashwin longevity. Additionally, he needs medical expenses of ₹12000 p.m.(present cost) after his retirement till Sumedha’s lifetime in both cases. What additional funds need to be accumulated by Ashwins’s retirement age? Also, by what percentage the retirement expenses should be curtailed to retain this cushion? [5 Marks] A) ₹1.46 crore; 18.66% curtailment B) ₹ 1.9 crore; 22% curtailment C) ₹ 85 lakh; 18.60% curtailment D) ₹ 80 lakh; 25% curtailment (15) Considering the above revised corpus needed, you envisaged Ashwin that corpus need to be accumulated by considering only Equity shares portfolio holding along with a separate Asset allocation fund. He invest 70:30 in Equity: Debt for 5 years, subsequently, the accumulated amount in asset allocation funds and further monthly investment is rebalanced in the ratio of 40:60 in Equity and Debt for the next 15 years. At this stage, the accumulation in equity, Debt and equity shares portfolio are redeemed and transferred to a designated retirement fund yielding 8% p.a. which is used for drawing retirement expenses. Cumulative Monthly investments maintained up to this period are double in the last 6 years up to retirement. What is the monthly investment required? [4 Marks] A) ₹ 32910 B) ₹ 44850 C) ₹ 28410 D) ₹ 29900 9

Additional Questions: Q.1 Which is a better investment if ashwin & sumedha want to accumulate 200 grams of gold for the marriage of their children? A) Physical Gold B) Gold ETF C) Both D) None of these Q.2 Why Ashwin wants to take house hold policy? A) Household policy covers on reinstate value and goods cover on their market value B) Household policy covers Both house & goods cover on market value C) Household policy covers on reinstate value. D) None of the above Q.3 In your initial meeting, to make an impression on Mr. Ashwin, you discuss the Financial Plan made by you for a famous doctor and also his spending habits with Ashwin. Which Code of Ethics prohibits you to have such a discussion with Ashwin? A) Code of Ethics of Professionalism B) Code of Ethics of Confidentiality C) Code of Ethics of Fairness D) Code of Ethics of Integrity Q.4 You advise Ashwin to buy a Rs. 50 Lakh life insurance term plan. While filling the proposal form for purchase of this term plan Ashwin does not mention details of another Life Insurance policy, taken by him earlier, from a different insurance company. In case of any mishap, under which principle the claim of Ashwin could be questioned by the present Insurer, if the facts of his earlier insurance policy become known? A) Principle of Insurable Interest B) Principle of Utmost Good Faith C) Principle of Waiver and Estoppel D) Principle of Indemnity Q.5 You, being a Financial Planner, would help Ashwin to set his financial goals in _________. A) Any term as desired by him B) Both current & future money terms C) Current money terms D) Future money terms Q.6 Ashwin has not prepared any WILL as on date. He wants to know that in case he dies intestate as per prevailing Hindu succession law in India. Which of his existing family members can be denied a share of his estate in case of a dispute? A) His Mother B) His Father C) His wife D) His wife and kids Q.7 Ashwin plans to pay off his loan after paying 5 more installments. he took a loan of Rs. 450000 for 4 years at 11.25% p.a. on reducing monthly balance basis on 1st April 2017. The first EMI was paid on 10

1st May 2017 and thereafter on every 1st of the month. Prepayment of car loan would attract a penalty of 4% on the outstanding liability. What amount is required to prepay the loan with penalty?(Please ignore any other charges and taxes if applicable) A) Rs.210603 B) Rs.302457 C) Rs.256987 D) Rs.354787 Q.8 Ashwin proposes to invest in an upcoming housing project in suburban Mumbai for a flat worth Rs. 7,500,000 today. He proposes to make the down payment of Rs. 500,000 immediately. The balance amount is to be paid in instalments to the builder, 15% of the balance amount on 1st April 2019, 30% on 1st September 2019, 30% on 1st December 2019 and balance on 1st April 2020. In the meanwhile, he has researched on the various housing loan schemes offered by banks. He has finalised on one of the Banks that provides the loan at fixed interest of 10.5% p.a. disbursable as per time schedule agreed with the builder. The tenure of the loan is 15 years from the date of disbursement of first instalment and he pays the first EMI on 1st May 2019. He wants to know, what would be final EMI payable after the full disbursement of loan amount? A) Rs. 84,301 B) Rs. 78,740 C) Rs. 78,682 D) Rs. 77,377 Q.9 Ashwin also wants to know what would be the additional investment yield, over and above risk- free return i.e. 6% p.a. required for the retirement corpus of Rs. 3.4 crores to sustain till his proposed post-retirement period while providing her an inflation-linked monthly annuity of Rs. 1.6 lakh. A) 8.66% p.a. B) 2.16% p.a. C) 3.19% p.a. D) 0.32% p.a 11

Solutions Q1 D) 1.08 crore (Solution given below) Current value of the desired house ₹ 1.40 crore Value of the desired house after 5 years ₹ 19181213 (14000000*1.065^5) Existing market value of the house ₹ 75 lakhs Value after 5 years ₹ 10275650 (7500000*1.065^5) Loan outstanding today ₹ 15.40 lakhs Balance after 5 years from now Set = end Amortization N = 116 (180-64) Set End I = 8% PM 1 1 PV = 1540000 PM 2 60 Pmt = -19106 Balance? 890514 FV = 0 P/Y = 12 C/Y = 12 Sale proceeds of existing house ₹ 10275650 Less loan outstanding ₹ 890514 Capital gain tax liability ₹ 1000000 Balance amount can be utilized ₹ 8385136 Amount needed to buy new house ₹ 10796077 (19181213-8385136) Q2 A) They must take Mortgage Redemption Insurance or an equivalent term insurance to cover outstanding loans Q3 A) ₹ 3782000 (Solution given below) Financial Assets Value ₹ 5599000 PPF 620000 Sovereign Gold Bonds 290000 Equity MF 1187000 Balanced MF 328000 12

Debt MF 767000 Equity Portfolio 1832000 350000 Term Deposits 225000 ₹1817000 Cash at bank 1540000 277000 Total liabilities ₹ 3782000 Home Loan Liability Car Loan ₹ 840000 p.m. Net worth = Assets – Liabilities 31 years ₹ 588000 (70% of 840000) Q4 C) ₹ 1.40 crore ₹ 10909729 (Solution given below) Current Expenses(Yearly) (7.5-5)/1.05 Current Age of Sumedha Amount Required 70% of current Expense ₹ 1896359 (588000*1.05^24) PV Today (31 to 55) ₹ 948179 (50% of 1896359) N = 24 ₹ 19172315 I = 2.38……. (RRR) PV =? (10909729) (7.5-5)/1.05 PMT = -588000 FV = 0 P/Y = 1 C/Y =1 Expenses required at the age of 55 Amount required from 55 to 82 PV at the age of 55 (55 to 82) N = 27 I = 2.38……. (RRR) PV =? (19172315) PMT = -948179 FV = 0 P/Y = 1 C/Y =1 13

PV today ₹ 3379648 (19172315/1.075^24) Total Amount required Today ₹ 14289377 (10909729+3379648) Current Insurance cover ₹ 400000 Additional Insurance cover required ₹ 13889377 (14289377-400000) Q5 D) ₹ 25223 (Solution given below) First Child would complete 18 years in (after 14 years) April, 2033 Funds required for First Child till April, 2037 Second Child would complete 18 years in (after 17 years) April, 2036 Funds required for Second Child till April, 2040 Period of investment till March, 2030 (156 Months) 13 years Amount required in April, 2033 ₹ 2349775 (800000*1.08^14) Amount required in April, 2034 ₹ 951651 (300000*1.08^15) Amount required in April, 2035 ₹ 1027783 (300000*1.08^16) Amount required in April, 2036 ₹ 4070020 (300000+800000)*1.08^17 Amount required in April, 2037 ₹ 1198806 (300000)*1.08^18 Amount required in April, 2038 ₹ 1294710 (300000*1.08^19) Amount required in April, 2039 ₹ 1398287 (300000*1.08^20) PV of these amounts in April, 2032 ₹ 8398967 (go to cash function put I = 11% (In investment yielding 11% p.a. ) Then go to cash editor put 0 in 1 then feed The above figures respectively NOTE: we can use RRR and putting non inflated values in cash function. We will get the same NPV Monthly amount required till March, 2032 (one year prior to April 2033) Set Begin N = 156 (13*12) I = 11% PV = 0 PMT = -25223 FV = 8398967 P/Y = 12 C/Y = 1 14

Q6 C) 9% (Solution given below) ₹ 2 lakh Current cost of annual vacation 8% Cost escalation Risk free rate 5.5% Vacation fund requires when due in 26 years ₹ 26275992 N = 16 I = -2.314……% (RRR) PV =? 26275992 PMT = -1479271 (200000*1.08^26) FV = 0 P/Y = 1 C/Y = 1 Required value in asset allocation fund before switch to risk free (3 years prior) 22376994 (26275992/1.055^3) This need to be accumulated by investing ₹3 lakh (increasing by 25% every year) in 6 annual investment. The return to be obtained in asset allocation fund is calculated by XIRR function in excel. 1- –1500000 2- –300000 3- –375000 4- –468750 5- –585937 6- –732421 7- –915527 8 to 23 - 24 - 0 IRR + 22376994 9% (8.62%) Q7 C) Pratik ₹ 60.7 lakh, 48% shortfall; Aslia ₹76 lakh 49% shortfall (Solution given below) PPF Account Balance as on 31 March 2019 ₹ 620000 Account Initial Maturity 2024 Numbers of Subscription Remaining 7 years Numbers of subscription from 2026 to 2041 15 Rate of interest throughout 7.75% Maximum subscription at the end of every financial year (22 years) ₹ 150000 15

Accumulated balance as on March 2041 (Pratik’s age 26, Aslia age 23) ₹ 11266928 Set = end N = 22 I = 7.75% PV = -620000 PMT = -150000 FV =?( 11266928) P/Y = 1 C/Y = 1 Accumulated balance as on March 2042 (Pratik age 27) ₹ 12140115 (11266928*1.0775) 50% of accumulated amount withdrawn for ₹ 6070057.5 (12140115/2) Pratik marriage expenses Estimated expenses for Pratik ₹ 11742927(2000000*1.08^23) Shortfall in Meeting Pratik marriage expenses 48.30%((6070057.5/11742927)-1) Remaining amount in PPF accumulated till March 2045 ₹7593546 (6070057.5*1.0775^3) Estimated expenses for Aslia ₹ 14792706 (2000000*1.08^26) Shortfall in meeting Aslia’s marriage expenses 48.67% ((7593546/14792706)-1) Q8 D) ₹ 182280 (Solution given below) Income under the head salaries Basic salary 720000 (60000*12) D.A 360000 (30000*12) H.R.A 180000 (15000*12) Transport allowance 90000 Medical reimbursement 15000 Entertainment allowance 90000 (7500*12) Income from salary ₹ 1455000 Income under the head house property Self-occupied GAV nil Less u/s 24 (b) 119223 (Current Home loan outstanding ₹ 1540000, cal. EMI and Int. payment 1 to 12 installment in the current year) 16

Refer question no. 1 for EMI calculation Loss from house property (-119223) Income from other sources Saving account interest 500 (exempt upto 10000 u/s 80 TTA) Interest on fixed deposit 100000 (90000/90 *100) Income from other sources ₹ 100500 Gross total income ₹ 1436277 Less deduction u/s 80 (c) 150000 PPF 45000 (if parents are not senior citizen then 25000) Deduction u/s 80 (d) Total income ₹ 1241277 0-250000 0% 0 Tax on total income Rs.184883 Rs.7395 250001-500000 5% 12500 Add (cess) Rs. 192278 -Rs.10000 500001-1000000 20% 100000 Less TDS Rs.182278 Tax Payable Rs.182280 More than 10 Lacs 30% 72383 Round off Q9 D) 46.6% Go to XIRR function of excel 12-Oct-16 -65 8-Dec-17 20 30-Nov-18 30 1-Apr-19 100 XIRR 46.6% Q10 A) CFP marks are owned outside the US by US based FPSB Ltd Q11 B) (ii) and (iv) Q12 C) this is a play on long duration with expected moderate trend in interest rates, thus scheme return though capital appreciation is expected. Q13 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 Q14 A) ₹1.46 crore; 18.66% curtailment 17

(Solution given below) Current age of Ashwin 34 years Retirement age 60 years Life expectancy of Ashwin 80 years Life expectancy of Sumedha 82 years Current expenses ₹ 70,000 p.m. Required annual expenses in the 1st year ₹ 2986765 (840000*1.05^26) after retirement (age of 60) PV of expenses required from Ashwin’s age ₹54356541 60 to Sumedha’s life expectancy Set = Begin ₹ 9318264 N=25 I = 2.85……% (RRR) (8-5)/1.05 PV =? (-54356541) PMT = 2986765 FV = 0 P/Y=1, C/Y=1 PV of medical expenses at Ashwin’s retirement to Sumedha’s life expectancy Set = Begin N = 25 I = 2.85% (RRR) PV =? PMT = -512017 (144000*1.05^26) FV = 0 P/Y=1, C/Y=1 Initial total corpus required at the Ashwin’s retirement age ₹ 63674805 (54356541+9318264) Lower yield: higher inflation: increased longevity Revised inflation 5.5% Revised investment yield 6.5% Retirement corpus to last 85-60 = 25 years (Ashwin 85 now coincide with Sumedha’s 82) Revised PV required at the Ashwin’s 60 ₹ 66831281 (60 to Sumedha’s life expectancy) Set = Begin N = 25 I = 0.94…..% (RRR) (6.5-5.5)/1.055 PV =? (-66831281) PMT = 2986765 18

FV = 0 P/Y=1, C/Y=1 Revised PV of Medical expenses required at the Ashwin’s 60 ₹ 11456794 (60 to Sumedha’s life expectancy) Set = Begin N = 25 I = 0.94…..% (RRR) PV =? (-11456794) PMT = 512017 FV = 0 P/Y=1, C/Y=1 Revised total corpus required (Solve PV) ₹ 78288075(66831281+11456794) Cushion built on retirement corpus ₹ 14613270 (78288075-63674805) Revised corpus to be withdrawn in the 1st year after retirement ₹ 2845699 ((2986765+512017) x 63674805/78288075) Pre-retirement expenses (at the given rate of inflation up to retirement) ₹ 3498782 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) 19

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) ₹ 7713 (5538+2175) ₹ 3085 (40% of 7713) Total accumulation after 5 years ₹ 4628 (60% of 7713) ₹ 40 Next 15 years = Rebalance assets allocation ₹ 60 ₹ 32243 Rebalanced Equity component accumulated (40%) Rebalance Debt component accumulated (60%) ₹ 33254 Revised equity investment per month ₹ 65497 (32243+33254) Revised debt investment per month ₹ 200 p.m. ₹ 122296 Equity investment accumulation in total 20 years Set = Begin ₹ 44850 N = 15*12 I = 11% PV =-3085 PMT = -40 FV =? P/Y=12, C/Y=1 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 ((54849696/122296)*100)) 20

Additional Questions 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) 450000 Amount of loan including processing fees 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 2019 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) 1,050,000 11,607 1st installment 1-Apr-2019 (CMPD;End, N=15X12, I=10.5, PV=1050000, FV=0, P/Y=C/Y=12, PMT=solve(11607)) 2nd installment 1-Sep-2019 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 installment 1-Dec-2019 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 installment 1-Apr-2020 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% 21

Case Study – B (Reference Date: 1st April, 2019) 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 31st March, 2019) 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) Basic Salary : 30.00 Dearness Allowance : 9.00 HRA : 4.80 1 Securities at cost Rs.35.62 lakh. Last purchase made in March, 2016. 2 Invested Rs.1.6 lakh on 17th July 2018 in the NFO of Gold ETF. 3 Account maturing on 1st April, 2025. 4 Invested Rs.1,00,000 every year for 6 years from 2007 to 2012. 5 Invested in 5 years bonds is stated at face value, purchased on issue on August, 18, 2015; 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 2017 at 11% p.a. on reducing balance basis for a term of 4 years 22

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 : 85 years Gurpreet’s expected life 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. 8 Term of 20 years, Purchased on 15th March, 2009. 23

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 24

Case Study - B (Gurpreet) (Reference Date 1st April 2019) (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 C) 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 25

the accommodation of both children’s, their current living expenses till his Gurpreet’s retirement 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 C) ₹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 2018 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 2019. From 1stOctober 2018 to 31st January 2019 the NAV of the scheme grew at an average rate of 2.5% per month, while from 1stFebruary 2019 till date, the NAV 26

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 2020 assuming the decline continue till 30th April 2020. Assuming that the SWP is effective on 1st of every month. You estimate the same is ______? [4 Marks] 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 which 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. (III) and (IV) 27

(II) and (III) (II), (III) and (IV) (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 2019-20 would prevail). [2 Marks] A) Will not be taxed they as they are minors 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 2017-18 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 2004. The cost of such Gold coins was ₹45250 at the time of purchase i.e. f.y. 2003-04, gold jewelry purchased for Rs. 250000 on 1 may 2013. (Ignore education cess) [5 Marks] A) ₹153160 B) ₹ 368340 C) ₹355659 D) ₹368420 (14) Gurpreet had purchased 1000 equity shares of X Ltd., listed in stock exchanges in India and abroad in April 2013 at the rate of ₹225 per share. Fair market value as on 31st Jan 2018 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 2020-21. [3 Marks] A) ₹28870 B) ₹28780 C) ₹23175 D) ₹32120 (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 the Life Assured becomes totally and permanently disabled 28

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 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%) A) Rs.25306 B) Rs.56980 C) Rs.30987 29

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 30

Solutions Q1 A) 14.14 (Solution given below) 5 lakh Portfolio amount = 4+1 lakh 0.80 Weightage of ABC 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 (Solution given below) Present annual Expenses (140000-45000)*12 = 1140000 Risk free rate 5.5% Escalation rate 5% Present Value of Annual living expenses from age of 43 to 60 ₹ 18665646 31

N = 17 ₹4268773 I = 0.476……. % (5.5-5)/1.05 PV =? ₹12108251 PMT = -1680000 (15000000/1.055^4) FV = 0 P/y=1, C/y = 1 Present value of boarding school (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 Present value of Geet higher education ₹ 4551463 ₹(5638464/1.055^4) N=4 I = -2.314……. % (5.5-8)/1.08 ₹7500000 PV =? (-4144440) 47094133 PMT = 1360489(1000000 x 1.08^4) ₹15000000 FV = 0 ₹3000000 P/y=1, C/y = 1 ₹18000000 Present value of House to accommodate ₹29094133 Total value of All PV (47094133-18000000) (7500000+18665646+4268773+12108251+4551463) Term insurance cover Endowment cover Total cover Additional cover required Q5 D) 32

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 33

8 =1000000 ₹6 lakh Calculate NPV = ₹ 4540636 is the answer Q7 A) Payor rider ₹10.225 (10*1.0225) Q8 C) ₹241177 58679.7066 (6, 00,000/10.225) (Solution given below) ₹15, 000 per month Original investment on 1st October 2018 2.5% NAV = 10 11.038 (10*1.025^4) Purchase price -3.20% Units allotted 11.038.3429*((1-0.0320)^ (2)) SWP started 1st April 2019 NAV grew from 1st October 2018 to 31st January 2019 Estimated NAV as on 31st January 2019 NAV declined from 01 February 2019 to 31st march 2019 Estimated NAV as on 31st march 2019 Date Estimated NAV Amount SWP Units redeemed Outstanding units 1st April 2019 10.3429 15,000 1450.270 57229.4366 1st may 2019 10.0119 15,000 1498.217 55731.2196 1st June 2019 9.6915 15,000 1547.748 54183.4716 1st July 2019 9.3813 15,000 1598.925 52584.5466 1stAugust 2019 9.0810 15,000 1651.800 50932.7466 1st Sep 2019 8.7904 15,000 1706.406 49226.34 1st Oct 2019 8.5091 15,000 1762.818 47463.522 1st Nov 2019 8.2368 15,000 1821.095 45642.427 1st Dec 2019 7.9732 15,000 1881.302 43761.125 1st Jan 2020 7.7180 15,000 1943.508 41817.617 1st Feb 2020 7.4710 15,000 2007.76 39809.857 1st March 2020 7.2319 15,000 2074.143 37735.714 1st April 2020 7.000 15,000 2142.857 35592.857 30th April 2020 6.776 35592.857 Estimated value on 31st April 2020 (6.776x35592.857) = ₹241177 Q9 C) ₹ 24227000 ASSETS 34

Equity MF 26.47 lakh Balanced MF 9.78 lakh Equity Shares 55.92 lakh Gold ETF 3.21 lakh PPF A/C 7.87 lakh ELSS 22.75 lakh Liquid Fund 10.25 lakh Corporate Bond 8.50 lakh Bank account 103.25 lakh Total Value of Assets ₹ 24800000 LIABILITIES Credit cards 0.72 lakh Car loan 5.01 lakh Total Value of Liabilities ₹ 573000 Net worth = Assets – liabilities ₹ 24227000 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 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 35

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 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) 36

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) 368420 (Solution given below) 1) Equity shares Sales Consideration 5592000 Less cost of acquisition 3562000 Long term capital gain 2030000 2) Gold ETF Sales Consideration 321000 Less indexed cost of acquisition 337518 (160000 * 289/137) Long term capital loss (-16518) 3) Gold coins Sales Consideration 1125000 Less indexed cost of acquisition 119975 (45250 *289/109) Long term capital gain 1005025 4) Gold Jewelry Sales Consideration 217000 Less indexed cost of acquisition 328409 (250000 *289/220) Long term capital loss (-111409) Net long term capital Gain other than equity shares (1005025-16518-111409) 877098 Tax on 877098@ 20% = 175420 Tax on equity shares 2030000-100000=1930000@10% 193000 TOTAL TAX =175420+193000 = 368420 Q14 D) ₹ 32120 450000 (1000*450) (Solution given below) 295568 (225000*289/220) Option - 1 154432 Sales Consideration 30886 Less indexed cost of acquisition 1235 Long term capital gain 37 Tax @ 20 % Add education cess

Tax liability from capital gains 32121 Round off 32120 Option - 2 Sales consideration 450000 (1000*450) (Less) cost of acquisition 225000 (1000*225) Long term capital gain 225000 Tax @ 10 % without indexation 22500 Add education cess 900 Tax liability from capital gains 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. Additional Questions 4 Q.1 D) Q.2 D) Q.3 D) Q.4 A) No. of years for goal 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 7000 11% 7% 2 2800 9% 1400 2800 38

FV after 2 yrs 75,053 73,602 36,081 8400 2 3360 3360 1680 10080 1,82,536 1,75,770 84,606 12096 FV after 4 yrs 4032 4032 2016 14515.2 2 3,32,979 3,14,819 1,48,822 17418.24 4838.4 4838.4 2419.2 FV after 6 yrs 5,39,955 5,01,222 2,32,735 2 5806.08 5806.08 2903.04 8,20,908 7,48,124 3,41,275 FV after 8 yrs 6967.296 6967.296 3483.648 2 FV after 10 yrs 1 FV after 11 yrs 9,99,717 9,03,084 4,08,537 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 Future value after 2 years Rs.5410 Rs.4846 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 39

Case Study – C (Reference Date: 1st April, 2019) 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 (2019-2020) : 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 Equity Mutual Fund portfolio Market Value (₹ lakh) as on 31st March, 2019 Balanced MF scheme investment : 32.45 Debt MF portfolio : 12.79 : 5.98 1 (Annual – 2 policies/Total Cover Rs.55 lakh) 2 (Annual – 2 policies/Total Cover Rs.20 lakh) 40

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, 2019 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. 4) Liquid MF Schemes : 6.00% p.a. ______________________ 3 Account matures on 1st April, 2025 4 Car purchased out of a loan availed of Rs. 14 lakh on 1st March 2016, 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. 41

6 Sum Assured of Rs. 5 lakh, Term of 15 years, Annual Premium of Rs. 45,565, Purchased on 18th September, 2014, 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: 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 42

Case Study - C (Sahanubhuti) (Reference Date 1st April 2019) (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] A) It is regarded as best practice under the FPSB India code of ethics and rules of professional conduct. B) It provides substantial protection to the planner under common laws against any claims arising Thereof. C) It will not attract the law of contract to determine the civil rights of both the parties. D) 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 (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, 2019 and another 20% six 43

months thereafter. The 3rd installment of 30% shall be due on 1st January, 2020 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. 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 44

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] 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] 45

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 (13) Sahanubhuti purchased 2,000 equity shares of face value ₹10 each on 10th June 2019 in ABC ltd at ₹60. The company declared 50% dividend with record date being 3rd august 2019. On 20th October 2019, she transferred 1200 shares out of these 2000 share, at 47 per share. She transferred balance 800 shares on 20th December 2019 at ₹25 per share. During FY 2017-18 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 46

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 2013. Sahanubhuti wants to know whether any capital gains tax liability would arise on such sell. [3 Marks] A) ₹145680 B) ₹161200 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 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 47

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 11th year, 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 2019-20 has paid medical insurance premium of Rs. 20,000 on 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 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 48

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 2019 10, 00,000 20% of 50, 00,000 294 Term outstanding Release of 2nd installment on 01/04/2020 15, 00,000 20% of 50, 00,000 285 Term outstanding = 300-6 Release of 3rd installment on 01/01/2021 15, 00,000 30% of 50, 00,000 273 Term outstanding = 294-9 Release of last installment on 01/01/2022 10, 00,000 30% of 50, 00,000 300 months Term outstanding = 285-12 10.5% Tenure of the loan is 25 years from 01/10/2019 9441 =release of 1st installment on 01/10/2019 Term outstanding = Rate of interest = EMI from 01/11/2019 to 01/04/2020 Set = End N = 300 I = 10.50% PV = -1000000 PMT =? FV = 0 P/Y=C/Y=12 49

Release of 2nd installment on 01/04/2020 10 lakh Principal outstanding of earlier installment = 995757 (AMRT;PM1=1,PM2=6, solve balance) Total loan outstanding = 995757+10,00,000 Term outstanding (Months) 19,95757 Rate of interest 294 EMI from 01/05/2020 to 01/01/2021 10.50% Set = End 18923 N = 294 I =10.50% 15 lakh PV = -1995757 1982138 PMT =? (AMRT-PM1=1, PM2=9, solve balance) FV = 0 34,82,138 P/Y = C/Y=12 285 =Release of 3rd installment on 01/01/2021 to 10.50% Principal outstanding of earlier installment 33244 Total loan outstanding 15,00,000+19,82,138 15 lakh Term outstanding 3447175 Rate of interest (AMRT-PM1=1,PM2=12,solve balance) EMI from 01/02/2021 to 01/01/2022 4947175 Set = End 273 months N = 285 I = 10.50% PV = -3482138 PMT = 33244 FV = 0 P/Y = C/Y=12 =Release of last installment on 01/01/2022 Principal outstanding earlier Total loan outstanding = 3447175+1500000 Term outstanding 50