Ashwin Mock Test Ref. SP-1 (Total No of Questions: 15, Total Marks 50) (Ref.

date 1/4/17)x

1) Ashwin wants Rs. 17 Lakh from the sales proceeds of his existing home towards meeting tax liability, stamp duty and
registration charges, and furnishing of proposed new house. You expect New Loan Interest rate will be 3% excess of the
average Repo rate as 6% to be maintained by RBI in future years. Ashwin wants to know How much EMI will have to pay
on proposed new house loan amount if keeps tenor till retirement. (3 Marks) Ans . 92252

2) You observe that Ashwin has not taken an adequate life cover. You assume that the investments made by the
couple would serve to achieve financial goals of their children. You compute the value of cover by considering current
household expenses, required inflation adjusted, to the extent of 90% until Sumedha's age of 55 years and 80% of
then expenses for the remaining period of her expected life by considering investment in Liquid MF schemes. This
cover required to be taken as term insurance exclusive of the Child plan comes to ______. (3 Marks) 2,73,15,100

3) Ashwin’s ideal life cover has to be estimated which in case of any exigency will first repay the outstanding
loans and the remaining would be invested along with the couple’s existing financial assets. Such combined
corpus would be invested in a 7.5% p.a. return instrument to sustain the family’s living expenses and the specific
financial goals of higher education & Marriage of their children. The living expenses need to be taken as
inflation-adjusted to the extent of 80% of their present household expenses for next 25 years and 60% for the
subsequent 30 years. What should be this ideal cover? [4 marks] Ans. 2,87,11,416 – 55,99,000 = 2,31,12,416

4) Ashwin and Sumedha wish their retirement corpus, as proposed, to also have a provision of gifting Rs. 25 lakh to
each of their children and an additional Rs. 50 lakh towards charity to an Old Age Home at Ashwin's age of 75 years.
The sums are at absolute values then. They also wish to provide in the corpus an additional Rs. 10,000 per month
(current costs) towards healthcare after Ashwin's age of 70 years. You estimate the required corpus, considering the
same shall be invested in investment yielding 7% p.a., to be _________. (3 Marks) (6,78,20,000 Cr)

5) You sensitize Ashwin & Sumedha about the assumptions made while working out retirement plan. You inform that
even 1% fall in expected yield on investing corpus or an equivalent higher inflation post-retirement would adversely
impact sustainability of corpus. Also, increasing longevity requires a sufficient cushion for living expenses. You work
out the corpus, as proposed, by considering 8% annual yield in a 5% inflationary scenario. For additional cushion, you
take yield and inflation at 7% and 6% respectively, while also considering 10 years more in Ashwin's longevity and 5
years more in Sumedha's longevity. What additional funds need to be accumulated by Ashwin's retirement age?
Alternately, by how much retirement expenses should be curtailed in the first year as a percentage of pre-retirement
expenses to retain this cushion? (5 Marks) (7.81 Cr – 5.36 Cr = 2.45 Cr, 31%)

6) Ashwin contributes diligently to his PPF account and wants to use the same for accumulating funds for the marriage
of his children. You suggest him to make maximum permissible subscriptions to his account towards on 1 st September
every financial year. You advise further extend the account thrice beyond initial maturity for terms of 5 years each with
similar subscriptions. The forth term of 5 years 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/Surplus in meeting the marriage expenses? (5 Marks) (Ans:
Prateek : Shortfall 54,79,531, Aslia Shortfall : 69,57,295)

7)
Ashwin & Sumedha will set aside immediately a sum of Rs. 5 lakh towards setting up a fund for vacation.
They will start contributing annual investments beginning April 2016 till age 59 of Ashwin. Such annual
investment will be doubled in 10th installment and again in 20th installment. The withdrawal from the fund
towards vacation will begin on annual basis from April 2021 till his retirement. You devise an asset allocation
for the vacation fund to yield 11% p.a. in the first ten years, decreasing by 1.5% sequentially in the
subsequent 10-year period, and the remaining period thereafter. What should be the amount of initial
annual investment? [5 marks] (Don’t Attend in Exam)
 8) For the higher education expenses for Prateek and Aslia, Ashwin starts accumulating funds with monthly
investment of Rs. 20,000 in an aggressive asset allocation yielding 12% p.a. After 7 years the allocation is
moderated to yield 9% p.a. and the accumulated funds invested at this rate for the next 5 years, while the
investment is raised to Rs. 40,000 p.m. The strategy is to shift the funds accumulated after 12 years to risk
free instruments from which distribution towards higher education is drawn as proposed. What would be
the shortfall / Surplus expected after 12 years in following this strategy? [5 marks] (Ans. Shortfall –
25,61,523)

9) Ashwin had purchased 5000 equity shares of ABC Ltd., listed in stock exchanges in India and abroad in Aug 2012 at
the rate of Rs. 275 per share. In April 2015, he transferred these shares privately to his mother at the rate of Rs. 600
per share,. Calculate his capital gains tax liability for AY 2016-17. (3 Marks) Ans. 1,62,500

10) Ashwin purchased 10,000 equity shares of face value Rs. 1 each on 15th April, 2015 in B Ltd. at Rs. 1165. B Ltd.
declared 5000% dividend with record date being 11th July 2015. On 1st October 2015, he sold 5500 shares out of these
10,000 shares, at Rs. 1100 per share. He further sold balance shares on 20th January 2016 at Rs. 1100 per share. During
FY 2015-16, Roger also generated long term capital gain of Rs. 5,50,000 on sale of gold. Determine his capital gains for
AY 2016-17. (5 Marks) (STCL =3,75,000, LTCG=5,50,000, Ans : Net LTCG= 1,75,000)

11) You as CFP have advised ashwin to invest in gold ETF instead of physical gold. What is correct about local and
international price of gold exchange rate of major currencies including rupee-US dollar exchange rate?

a) Local prices of gold bare determined by local demand and are relative to international prices b) International gold
prices move inversely to appreciation in the US dollar against major currencies. c) International gold prices move
directly to an appreciation in the US dollar against major currencies. d) Exchange rates have little relevance to local as
well as international prices of gold.

12) After scrutinizing Ashwin's investment in financial assets your advice would be

a) Exposure to equity 55%, would increase due to his committed SIP, exposure to debt is just 30% and need to be
increased b) Exposure to equity and debt is 50%, incremental surplus in future years should be routed to equity for long
term goals c) A current ratio of equity to debt is going to change in favour of equity due to committed investment,
increase debt. d) Exposure to equity more than 60% is appropriate; nearly 20% exposure to debt and remaining in
liquid securities should be maintained in future.

Q.13Which risk will be eliminated if ashwin invests in Debt Instruments?

a. Market Risk b. Credit Risk c. Inflation Risk d. All of the above

Q-14) What type of organization is FPSB?

1) Quasi Government Body 2) Self – regulatory 3) Govt. body 4) Private body

Q-15) You have advised Ashwin to set up a Living Trust in the name of his two children’s as beneficiary. He wants to
invest a lump sum in the trust to meet the future expenses in case of any unfortunate event. He would like to know the
tax implication of the income from the trust.

A) The trust cannot be formed as the children’s are minors.

B) The income from the trust is clubbed along with gurpreet’s income and will be taxable.

C) The income from the trust will not clubbed along with gurpreet’s income and will tax free to trust.

D) The income from the trust will not clubbed along with gurpreet’s income and will have separate taxation as per
trust tax laws.