INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING

GHAZIABAD
End-Term Examinations – June 2009
Subject Code : IMT-110 Time Allowed : 3 Hours
Subject Name: Basics of Personal Financial Planning Max. Marks : 50

Notes: (a) Answer any FOUR questions from SECTION-A and CASE STUDY as given in SECTION-B.
Each Question (SECTION-A) carries 9 MARKS and (SECTION-B) Case Study carries 14 MARKS.
(b) No doubts/clarifications shall be entertained. In case of doubts/clarifications, make reasonable assumptions and proceed.
(c) For students enrolled in January 2008, July 2008 and January 2009 batches, the Question Paper would be treated for
70 marks instead of 50 marks.
SECTION-A MARKS : 36

Q1. Discuss the importance of obtaining financial information relating to a client in the preparation of a financial plan. How will
you gather and assess this information?
Q2. a) Explain the concept of Time value of money and its importance in formulating personal financial goals.
b) Would you rather receive Rs 5000 today or Rs 10000 in 10 years? Assume the rate of interest to be at 9%
(assume future value of Rs 1after 10 year period = Rs 2.3674)
Q3. a) How do you estimate optimal insurance protection for an individual? What is net worth and how is it measured?
b) Discuss the concept of Human Life Value bringing out the information set that is required for its computation.
Q4. a) Discuss the objective of tax planning? What are the sources of income that are exempt from tax?
b) Mrs Veena, age 45, earns gross income of Rs 950000 in FY 2008-09. She invests in equity linked tax savings –
Rs 60000/- in the Public provident fund- Rs 20000/ and in equity linked tax savings scheme Rs 30000/-. She also has
a mediclaim policy where she pays a premium of 15000/- annually. Calculate her tax liability.
Q5. Why is a written financial plan preferable over an oral one? What are the major components of a comprehensive written
plan?
Q6. Hari (25years), a software engineer, is presently working with Infosys and is earning a gross salary of Rs 3,60,000 p.a.
Out of that, 25% is chargeable for the payment of income tax. To maintain a particular standard of living, he is required to
spend Rs 18000 p.m. out of which 80% is meant for the dependants of his family. The amount thus saved is deposited in
SBI at 8% rate of interest. Out of total savings, 80% is expected to fulfill the incremental future requirements of the
dependants and rest for the self requirements during his old age following retirement at 65 years of age. (Given, Present
value factor= 11.92)
You are required to calculate the life value of Hari through the Human Life Value method.
Q7. Write short notes on any three-
(i) Rule of 72 (ii) Annuity (iii) Estate planning
(iv) Present value and future value of money (iv) Investment Risks

SECTION-B (Case Study) MARKS : 14

Ram, a 40 year old salary earner, draws a monthly take home pay of Rs 40,000/- His family includes his wife and two school
going children-
Family composition- Wife aged- 35 years
A girl aged 12 years
A boy aged 9 years.
His annual family expenditure is Rs 3,00,000. He will retire from his job at the age of 60, without any pension benefit from his
company. As such, he decides to plan for his retirement needs. He projects his annual expenditure post retirement to be 50% of
what it is today. He also expects 5% per year future inflation. He expects to earn about 9% on his investments prior to retirement.
(Given: the 5% Inflation factor for Rs 1 in a time period of 20 years= Rs 2.65 and Expected rate of return compound interest
factor @9% for 20 years- 51.1)
Questions
1. How much retirement fund would Ram need considering the inflation factor? (5)
2. Advise Ram on how much does he need to save annually in order to accumulate the needed amount within 20 years? (5)
3. Why has retirement planning assumed more importance now, than it was forty years ago? List the factors that
affect sound retirement planning. (4)

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