SR No.

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11
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15
Salim expects to pay out the following in next few years: to pay out these amounts how much should he have now,
assuming an annual rate of 10%?
End of Year 1: Rs. 25,000
End of Year 2: Rs. 22,000
End of Year 3: Rs. 19,000
End of Year 4: Rs. 16,000
End of Year 5: Rs. 13,000

A) 66905
B) 69865
C) 68868
D) 74184

ANSWER: 74184

A private sector employee aged 58 has his retirement fund valued at Rs. 1.75 core. He is due to receive gratuity
under the Payment of Gratuity Act from his employer. He decides that he would commute one-third of his retirement
account balance, the rest being utilized by his employer to pay him a fixed immediate monthly annuity for 25 years
through a pension product which gives an effective annual yield of 8%. What would be the amount of his monthly
income in the first year?

A) 87,337
B) 121,291
C) 131,004
D) 79,850

ANSWER: 87,337

₹ 87,337
I took eff rate instead of taking nominal rate and dividing by 12

A person invested Rs. 50 lakh in a 30-year fixed monthly annuity providing a yield of 9% p.a. What will be the amount
of monthly annuity if the start date is deferred by 5 years?

A) 62,271
B) 59,537
C) 61,439
D) None of the above

ANSWER: 59537

I considered 9% as nominal rate

Pranay salary is 4 lac and he wants to invest 10% of his salary every year @ 6%pa for 30 years. His salary is also
increasing every year by 5%pa. He wants to know if he makes investment for 25 years only and after that he will keep
the fund invested for another five years at the same rate, then what percentage of salary he has to save in first year
to achieve his goal. He needs to have the same amount of accumulated saving as at the age of 60 yrs. (Investment at
the beginning of the year)

A) 13.21%
B) 14.12%
C) 15.64%
D) 9.31%

ANSWER: 15.64%

Formula holds god for the investments at the end of the period

this is multiplied by
*(1+i) (1+i) only when
investment is done
from beginning of
It should be multiply by (1+i) to get Fv at the beginning the year
Rajiv salary is 3 lac and he wants to invest 10% of his salary every year @ 6%pa for 30 years. His salary is also
increasing every year by 5%pa. He wants to know if he pre-pone his retirement by 5 years , then what percentage of
salary he has to save in first year to achieve his goal. He needs to have the same amount of accumulated saving as at
the age of 60 yrs. (Investment at the beginning of the year)

A) 12.42%
B) 15.70%
C) 18.22%
D) 17.12%

ANSWER: 15.70%

Step 1- we willfind corpus as per originally given in question

4520525.17688506

Step 2- we will have to find the amount, if we need the same corpus at the age of 55
so now we will find the amount keeping everything same and changing the N as 25
=(((1.06^25)-(1.05^25)*1.06)/0.01)*A
Ranka (Age 30) started investing in a pension plan . He had decided to increase his contributions by 50% after every 5
years. He is now 50 years old and is going to invest 122000. His CAGR has been around 14% p.a. If he wishes to retire
at the age of 55, what amount of retirement corpus will he have accumulated till then?(Investment is at beginning of
every year)

A) 70 lac
B) 80 lac
C) 84 lac
D) 74 lac

ANSWER: 80 lac

If you borrow Rs.500000 for a house @ 8.25% p.a. for 20 years, what is your monthly payment?

A) 5,343
B) 4,260
C) 5,433
D) 3,134

ANSWER: 4260
The present expense of a household is Rs. 10000 per month. This price rose for 6% for 4 years after which it fell by 8%
in a year and then started rising by 5%. Find the cost of the item in 10 years time.

A) Rs.14996
B) Rs. 17401
C) Rs. 15432
D) Rs. 14823

ANSWER: 14823

Vaman needs Rs.30000 in 5 years time for his son’s college education. What is the amount required to be kept aside
at the end of each year if the earnings rate is 5% p.a.?

A) Rs. 5249
B) Rs. 5429
C) Rs. 5170
D) Rs. 5294

ANSWER: 5429

If you start saving at Rs. 1.5 lakh a year and the earning rate is 12% what is the time required to cross Rs 60 lakhs of
capital?  

A) 16 years
B) 20 years
C) 23 years
D) 26 years
ANSWER: 16 years

Poonam deposits Rs. 25000 at the beginning of each year in deferred annuity scheme as a part of her retirement
planning. How much will be in the account after 30 years if it earns 8% compound annual interest?

A)4474985
B)4893835
C)4247216
D)3058646

ANSWER: 3058646

Which of the following selections has the lowest present value if the discount rate is 5%? The first cash flow occurs at
the end of the first period, the second cash flow at the end of the second period, and so on

A) Rs.100; Rs.100; Rs.100; Rs.100

B) Rs.0; Rs.0; Rs.0; Rs.500
C) Rs.350; Rs.0; Rs.0; Rs.0
D) Rs.50; Rs.50; Rs.50; Rs.375

ANSWER: Rs.350;Rs.0;Rs.0;Rs.0
A 30 years old employee is currently earning an annual salary of Rs 3,00,000. He has started saving 10% of his salary
at the end of each year in a savings plan yielding 6% interest pa. His salary increases by 5% pa. (Assumption that his
savings happen in the end of the year). What accumulated amount would he be having on retirement at age 60?

further, Mr A wonders if he invests only for 25 years, instaed of 30 years but also wants to have the same amount at
the age of 60 then how much initial amount should he start with?
A) 4264646
B) 4650183
C) 3906757
D) None of the above

ANSWER: 4264646

Formula of Future value of a growing annuity (cash flow at the end of the year)

A=amount
i-rate of interest
g=growth rate
n=no. of years
Assumption- I and g will remain constant

An executive purchased an annuity for a lump sum Rs. 85 lakh when he was of 53 years and had in dependents a non-
working spouse of age 48 and a son of age 25. On reaching age 60, he expects at least one, himself or his spouse, to
survive till 85 years and contracts an immediate life annuity with return of purchase price at Rs. 10.15 lakh p.a. vested
against the purchase price of Rs. 1.61 crore. What return is expected from the vesting date?

A) 6.73%
B) 5.76%
C) 4.25%
D) 5.17%

ANSWER: 6.73%
 

 
 nominal rate- 7%
effective
7.23%
7.00%

type

Immediate annuity 1

corpus 17,500,000
commuted 5,833,328
pension corpus 11,666,673
type 1.00
Nper 300.00
PMT ?

rate monthly
7.72%
0.64%

pv 5000000
nper 30
r 9%
fv after 5 years ₹ 7,693,120
₹ 59,537.44
8.65%

(a)
 (b)

Answer
 1 type
300000 salaly
10% invest %
30000 invest value
5% growth
6% ROR
4520525.17688506 at 60 years
4520525.17688506 FVGA
95.9846725574749
₹ 47,096.32 Amount of initial investment
15.70% % of salary
 (b)

Answer

Method 1
 Method 2

HW

₹ -4,260.33
 10000
10600
11236
11910
12625
11615
12196
12805
13446
14118
14823.74

₹ -5,429.24

16
 25000
30
8%
₹ -3,058,646.70

₹ 354.60
₹ 411.35
₹ 333.33
₹ 444.68
PART 1

salary 300000 Part 2

saving-pmt 30000 40000
r 6% 6%
increase in salary 5% 5%
years 30 25 30
fv at 60 years 4264646.39 5686195
fv at 55 years 2716547.34 3622063
fvga 4249056
a ie PV ? Find
using formula 91
a 46924
wrong 626993
146088
 Solution

End of Year 1 25000

End of Year 2 22000
End of Year 3 19000
End of Year 4 16000
End of Year 5 13000

Npv Rs. 74184

Solution

Retirement Fund 17500000

lumsum commute 1/3 rd
Remaining 2/3 rd Annuity 11666667
Rate (EAR) 8%
APR 7.72%
Nper 25
Pmt Rs. 87337

Solution

Principal Amt 5000000

Nper 30
 EAR (Rate) 9%
APR 8.65%
Annuity to start after (years) 5
Fv 7693120
PMT Rs. 59537

Solution

Salary 400000
Method 1
Years Saving growth @5% (g)
1 40000
2 42000
3 44100
4 46305
5 48620
6 51051
7 53604
8 56284
9 59098
10 62053
11 65156
12 68414
13 71834
14 75426
15 79197
16 83157
17 87315
18 91681
19 96265
20 101078
21 106132
22 111439
23 117010
24 122861
25 129004
26 135454
27 142227
 28 149338
29 156805
30 164645

NPV 1049426
Rate (i) 6%
Fv (30) 6027367

Fv (25)

Years Saving
1 100
2 105
3 110
4 116
5 122
6 128
7 134
8 141
9 148
10 155
11 163
12 171
13 180
14 189
15 198
16 208
17 218
18 229
19 241
20 253
21 265
22 279
23 293
24 307
25 323

Method 1 100
1st year inst. 46924
salary 400000
% of salary in 1st yr 11.73%

Fv (25) (begin) A (?)

4503999 46924
Method 2
 Solution

Salary 300000
Method 1
Years Saving growth @5% (g)
1 30000
2 31500
3 33075
4 34729
5 36465
6 38288
7 40203
8 42213
9 44324
10 46540
11 48867
12 51310
13 53876
14 56569
15 59398
16 62368
17 65486
18 68761
19 72199
20 75809
21 79599
22 83579
23 87758
24 92146
25 96753
26 101591
27 106670
28 112004
29 117604
30 123484

NPV 787069
Rate (i) 6%
Fv (30) 4520525
 Years Saving
1 100
2 105
3 110
4 116
5 122
6 128
7 134
8 141
9 148
10 155
11 163
12 171
13 180
14 189
15 198
16 208
17 218
18 229
19 241
20 253
21 265
22 279
23 293
24 307
25 323

Method 1 100
1st year inst. 47096
salary 300000
% of salary in 1st yr 15.70%

Fv (25) (begin) A (?)

4520525 47096
Method 2

Solution

Age Contribution Growth @50%

30 24099
 35 36148
40 54222
45 81333
50 122000
55 Accumulated Retirement Corpus

30 24099
31 24099
32 24099
33 24099
34 24099
35 36148
36 36148
37 36148
38 36148
39 36148
40 54222
41 54222
42 54222
43 54222
44 54222
45 81333
46 81333
47 81333
48 81333
49 81333
50 122000
51 122000
52 122000
53 122000
54 122000

Npv (Beginning) 304371

Fv (at 55 age) Rs. 8054253

Solution

Pv 500000
Rate 8.25%
Nper 20
EMI -Rs. 4260
 Solution

HHE (current) 10000

Inflation (1) 6%
Nper (1) 4
Fv (1) 12625
Inflation (2) -8%
Nper (2) 1
Fv (2) 11615
Inflation (3) 5%
Nper (3) 5
Fv (3) Rs. 14824

Soultion

Fv 30000
Nper 5
Rate 5%
PMT -Rs. 5429

Solution

PMT 150000
Rate 12%
Fv 6000000
Nper 15.5 years
 Solution

PMT 25000
Nper 30
rate 8%
Fv Rs. 3058647

Solution

A
Rate 5%
year end 1 100
year end 2 100
year end 3 100
year end 4 100
NPv 355
 Solution

Salary p.a. 300000

Saving Rate 10%
Saving p.a. (A) 30000
Rate (i) 6%
Growth in salary p.a. (g) 5%
Nper (n) 30
Fv Rs. 4264646

Solution

Annuity Purchase Price (Pv & Fv)) 16100000

Annuity p.a. 1015000
Nper (Self) 39
Nper (Spouse) 44
Nper (Son) 67
Take maximum Nper
Rate 6.73%
immediate monthly annuity (type 1)
7693120
Type 1 (Beginning)

Method 2 Method 3 Method 4

Fv
229740 40000 40000
227572 40000
225425 40000
223299 40000
221192 40000
219105 40000
217038 40000
214991 40000
212963 40000
210954 40000
208963 40000
206992 40000
205039 40000
203105 40000
201189 40000
199291 40000
197411 40000
195548 40000
193704 40000
191876 40000
190066 40000
188273 40000
186497 40000
184737 40000
182995 40000
181268 40000
179558 40000
177864 40000
176186 40000
174524 40000
0.952%
1049426

6027367 6027367 6027367

4503999 Discounted by 5 years (age 25)

Fv
429
425
421
417
413
409
405
402
398
394
390
387
383
379
376
372
369
365
362
358
355
352
348
345
342
Method 1 Method 2
9598 9598
4503999

i g n
6% 5% 25
Method 2 Method 3 Method 4
Fv
172305 30000 30000
170679 30000
169069 30000
167474 30000
165894 30000
164329 30000
162779 30000
161243 30000
159722 30000
158215 30000
156723 30000
155244 30000
153779 30000
152329 30000
150892 30000
149468 30000
148058 30000
146661 30000
145278 30000
143907 30000
142550 30000
141205 30000
139873 30000
138553 30000
137246 30000
135951 30000
134669 30000
133398 30000
132140 30000
130893 30000
0.952%
787069

4520525 4520525 4520525

 Fv
429
425
421
417
413
409
405
402
398
394
390
387
383
379
376
372
369
365
362
358
355
352
348
345
342
Method 2 Method 2
9598 9598
4520525

i g n
6% 5% 25

Fv after 5 years @14%

 181597
622044
1606285
3705654
Rs. 8054253

1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
recession

=10-4-1

Type 0 (end)
type 1 (Beginning)

B C D
5% 5% 5%
0 350 50
0 0 50
0 0 50
500 0 375
411 333 445
end of period

with return of Purchase Price

Type 1 (Beginning)
current age 53, 7 yrs to go
current age 48, 7 yrs to go
current age 25, 7 yrs to go

with return of Purchase Price

RRR
Beginning

Investments done at the beginning

RRR
Beginning

Investments done at the beginning