NISM Series X-B: Investment Adviser (Level 2) Cert. 'Case Study 5'

1. Harish is 40 years old and intends to retire at the age of 55. He is saving for retirement and the corpus will have a balance of Rs.15 lakhs at the end of the current year. The monthly contributions that Harish and his employer makes towards the retirement corpus amounts to Rs.10,000 pm. This is expected to go up 10% each year. The retirement corpus is invested in debt and is expected to earn a return of 8% pa.

Q1)Harish invest this corpus post retirement in a Debt Instrument yielding 8% p.a. Inflation at 6% p.a. How long can Harish take Rs 9 Lakh per annum for his retirement expenses? Round off to the nearest figure. Assume withdrawal at the End of the period.

2. Dhruv has base health policy of Rs.3 lakhs and a Top-up policy of Rs.10 lakhs with Rs.5 lakh deductible. Dhruv is evaluating an Life Insurance cum investment plan on which he will pay an annual premium of Rs.6,000 for a sum assured of Rs.1 lakh. The term of the policy is 20 years and the maturity value is Rs.2,00,000. A term plan of similar tenor and maturity costs Rs.150 per Rs.1 lakh sum insured.
Q2)What is the return that Dhruv will earn on the investment portion of the Life Insurance policy?

3. Dhruv has base health policy of Rs.3 lakhs and a Top-up policy of Rs.10 lakhs with Rs.5 lakh deductible. Dhruv is evaluating an Life Insurance cum investment plan on which he will pay an annual premium of Rs.6,000 for a sum assured of Rs.1 lakh. The term of the policy is 20 years and the maturity value is Rs.2,00,000. A term plan of similar tenor and maturity costs Rs.150 per Rs.1 lakh sum insured.
Q3)He has to meet medical expenditure of Rs.4 lakhs. How much of the expense will he have to bear out of his pocket ?

4. Harish is 40 years old and intends to retire at the age of 55. He is saving for retirement and the corpus will have a balance of Rs.15 lakhs at the end of the current year. The monthly contributions that Harish and his employer makes towards the retirement corpus amounts to Rs.10,000 pm. This is expected to go up 10% each year. The retirement corpus is invested in debt and is expected to earn a return of 8% pa. Harish needs Rs 10 Lakhs per annum as retirement expenses during his retirement period. His life expectancy is 80. Harish has taken a property insurance. The policy has a co-pay of 5% and deductible of Rs.10,000.
Q4)What is the surplus or shortage in the retirement corpus achieved by Harish? Assume inflation as 6%.

5. Harish is 40 years old and intends to retire at the age of 55. He is saving for retirement and the corpus will have a balance of Rs.15 lakhs at the end of the current year. The monthly contributions that Harish and his employer makes towards the retirement corpus amounts to Rs.10,000 pm. This is expected to go up 10% each year. The retirement corpus is invested in debt and is expected to earn a return of 8% pa. Harish needs Rs 10 Lakhs per annum as retirement expenses during his retirement period. His life expectancy is 80. Harish has taken a property insurance. The policy has a co-pay of 5% and deductible of Rs.10,000.
Q5)Harish has suffered damage to his insured property and wants to make a claim of Rs.50,000. How much will the insurance company reimburse?

6. L is in her late 60s and has a comfortable pension and assets to take care of her retirement years. She has made a Will and got it registered to make sure that her children will have access to her money, whenever they need it. She has bequeathed her house to her son since he does not own a house yet and her financial investments in mutual funds to her daughter. She finds that she is able to save some part of her pension and wants to create a corpus for the college education of her grandchild who is five years old.
Q6)Which of the following funds would be best suited for L to create a corpus for her grandchild’s education?

7. L is in her late 60s and has a comfortable pension and assets to take care of her retirement years. She has made a Will and got it registered to make sure that her children will have access to her money, whenever they need it. She has bequeathed her house to her son since he does not own a house yet and her financial investments in mutual funds to her daughter. She finds that she is able to save some part of her pension and wants to create a corpus for the college education of her grandchild who is five years old.
Q7)L’s son wants to take a loan with the house as security and giving L’s Will to prove his future ownership of the property. Is this a valid position?

8. L is in her late 60s and has a comfortable pension and assets to take care of her retirement years. She has made a Will and got it registered to make sure that her children will have access to her money, whenever they need it. She has bequeathed her house to her son since he does not own a house yet and her financial investments in mutual funds to her daughter. She finds that she is able to save some part of her pension and wants to create a corpus for the college education of her grandchild who is five years old.
Q8)L’s daughter has an immediate need for money to meet an emergency. Which of the following will enable her to access the money L has intended for her to have?

9. Jaspreet is 40 years old and currently requires Rs.50,000 pm to meet living expenses. He wants to retire at the age of 60 and expects his expenses to be at the same level, adjusted for inflation. He expects to fund 25 years in retirement. He sees inflation at 8% and investment returns in retirement at 9%.
Q9)Calculate inflation adjusted return post retirement.

10. Jaspreet is 40 years old and currently requires Rs.50,000 pm to meet living expenses. He wants to retire at the age of 60 and expects his expenses to be at the same level, adjusted for inflation. He expects to fund 25 years in retirement. He sees inflation at 8% and investment returns in retirement at 9%.
Q10)He wants to know what is the corpus required to provide the retirement income required.