NISM Series X-B: Investment Adviser (Level 2) Cert. 'Case Study 6'

1. 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%.
Q1)Calculate yearly expenses at the time of retirement.

2. Adil wants to ensure that his spouse will be able to take care of household expenses that currently amount to Rs.25,000 per month, even in the event of his death. He wants to make this provision for 30 years. Apart from household expenses, he wants to leave a corpus of Rs.10 lakhs for his child’s requirements. He also has an outstanding home loan of Rs.30 lakhs. He has a life insurance of Rs.50 lakhs.
Q2)What is the Corpus required to provide income for expenses?

3. Adil wants to ensure that his spouse will be able to take care of household expenses that currently amount to Rs.25,000 per month, even in the event of his death. He wants to make this provision for 30 years. Apart from household expenses, he wants to leave a corpus of Rs.10 lakhs for his child’s requirements. He also has an outstanding home loan of Rs.30 lakhs. He has a life insurance of Rs.50 lakhs.
Q3)What is the total corpus required taking into account Childs requirements and Outstanding Home Loan?

4. Adil wants to ensure that his spouse will be able to take care of household expenses that currently amount to Rs.25,000 per month, even in the event of his death. He wants to make this provision for 30 years. Apart from household expenses, he wants to leave a corpus of Rs.10 lakhs for his child’s requirements. He also has an outstanding home loan of Rs.30 lakhs. He has a life insurance of Rs.50 lakhs.
Q4)How much additional life insurance should he take to meet these requirements?

5. Charu earns a monthly income of Rs.50,000, which she uses to meet expenses and save for her goals. She wants to ensure that she is adequately insured so that her family will continue to have the income she would have earned through her working life. Charu is 35 years old and expects to work till the age of 60. She sees inflation at a level of 6% and long term investment returns at 10%. She currently has an insurance cover of Rs.40 lakhs.
Q5)What is the corpus required which can be deployed at 10% so as to maintain same life style for Charus family in case of demise of Charu?(take into account inflation also)

6. Charu earns a monthly income of Rs.50,000, which she uses to meet expenses and save for her goals. She wants to ensure that she is adequately insured so that her family will continue to have the income she would have earned through her working life. Charu is 35 years old and expects to work till the age of 60. She sees inflation at a level of 6% and long term investment returns at 10%. She currently has an insurance cover of Rs.40 lakhs.
Q6)Calculate Inflation adjusted long term return.

7. Charu earns a monthly income of Rs.50,000, which she uses to meet expenses and save for her goals. She wants to ensure that she is adequately insured so that her family will continue to have the income she would have earned through her working life. Charu is 35 years old and expects to work till the age of 60. She sees inflation at a level of 6% and long term investment returns at 10%. She currently has an insurance cover of Rs.40 lakhs.
Q7)How much additional life insurance should he take to meet these requirements?

8. Mr.Jeevan received a proposal for two variants of a Term Plan. Pure Term plan without return of premiums and Term Plan with return of premiums paid. The details are as follows Sum Assured: Rs. 1,00,00,000 Policy tenure: 30 years Policy premium if pure protection policy: Rs. 9416/- per annum Policy premium if premiums returned in the end: Rs. 17,473 per annum Risk free rate is 6%.
Q8)Which one in your suggestion is good for Mr.Jeevan ?

9. Mr.Jeevan received a proposal for two variants of a Term Plan. Pure Term plan without return of premiums and Term Plan with return of premiums paid. The details are as follows Sum Assured: Rs. 1,00,00,000 Policy tenure: 30 years Policy premium if pure protection policy: Rs. 9416/- per annum Policy premium if premiums returned in the end: Rs. 17,473 per annum Risk free rate is 6%.
Q9)The inherent investment return in Return of Premium policy is __________.

10. Mr.Jeevan received a proposal for two variants of a Term Plan. Pure Term plan without return of premiums and Term Plan with return of premiums paid. The details are as follows Sum Assured: Rs. 1,00,00,000 Policy tenure: 30 years Policy premium if pure protection policy: Rs. 9416/- per annum Policy premium if premiums returned in the end: Rs. 17,473 per annum Risk free rate is 6%.
Q3)Mr.Jeevan also received a quote for Endowment Assurance plan for Sum Assured of Rs 1 Crore for a term of 30 years @ a premium of Rs. 3,16,332 per annum. The amount payable after 30 years as per official illustration of the Insurance company: Rs. 2,14,00,000.
He wants to know which policy he should take – Endowment Assurance or Pure Term Plan. According to you it should be __________