Mahesh Case Study

Q1) You suggest Neelam to take a life insurance cover such that in case of any eventuality with her life, her family
should not be diverted of her annual contribution to the extent of Rs. 3.2 lakh as incremented every year by 10% for
at least 15 years. What should be the cover if the claim proceeds are invested in debt instrument? (3 Marks)

a) 60 lakhs
b) 27 lakhs
c) 1.60 cr.
d) 40 lakhs

Q2) Mahesh wants that in case of any life eventuality, his family receives annual cash flow steam equal to 70% of his
current emoluments for 15 years escalating at 5% year on year. Mahesh’s portion of housing loan needs to be repaid
in case of such eventuality. The net amount of such claim along with claim of his existing insurance policies needs to
be invested to yield 8.5% p.a. What additional insurance cover needs to be purchased? (4 Marks)

a) 60 lakhs
b) 1.2 cr.
c) 1.07 cr.
d) 25 lakhs

Q3) As part of retirement strategy, you advice Mahesh and Neelam to use the PPF account, for accumulating
retirement corpus. You advise them to contribute maximum permissible amount in the respective PPF account in the
beginning of every financial year. You also advice to extend the account for 2 terms of 5 years each beyond the initial
maturity while maintaining the same investment discipline, what approximate combined amount could be
accumulated when Mahesh retires? (3 Marks)

a) 71 lakhs
b) 1.31 cr.
c) 1.24 cr.
d) 1.11 cr.

Q4) Mahesh will accumulate half of the envisaged retirement corpus through SIP immediately in an asset allocation
of 70:30 in equity and debt respectively. After 4 years, he will rebalance the accumulated amount in a revised asset
allocation of 50:50 for next 6 years along with continued SIP in the revised ratio. The accumulated amount in the
asset allocation is then switched to a designated retirement fund yielding 6.5% p.a. with continued SIP till
retirement. The same fund is used for drawing the required income till last survivor by investing in it the other half
corpus. What SIP is required today in the asset allocation?
(5 Marks)

a) 23300/month
b) 19900/month
c) 19250/month
d) 20250/month

Q5) You suggest Mahesh to achieve the goal for accumulation of funds for marriage expenses of Varun and Sapna by
starting SIP monthly from today in the existing Diversified Equity Mutual Fund for 4 years and shift to Debt
instrument 3 years prior to Sapna’s marriage. What is approximate monthly investment amount required in the
existing Equity Mutual Fund scheme today?
(5 Marks)

a) 47500
b) 42500
c) 55250
d) 45500

Q6) Neelam wants to start a consultancy firm, outlay of which is 30 lakhs escalating at 7% on Mahesh’s retirement.
She will invest by way of a quarterly SIP in Equity Index Fund for the first 3 years after which she will increase the
investment by 50% while continuing in equity for 5 more years. After 8 years, half of the funds accumulated shall be
switched to Liquid schemes. Further investment will be stopped at this stage fully switching Equity Index Fund to
Liquid Scheme. The Liquid Scheme accumulation is finally utilised towards the said venture. What quarterly SIP
should she start today? (5
Marks)

a) 49625
b) 101500
c) 37390
d) 56800

Q7) For Sapna’s Graduation, the required funds will be accumulated in Debt MF and Government Security (Gilt) MF
Scheme. The gold ETF shall be redeemed today and after the tax incidence of 5%, the proceeds shall be invested in
Gilt Scheme. The tax impact of Debt MF scheme and Gilt Scheme is estimated at 3% of proceeds. If the Debt MF
gives a return of 1.5% p.a. above the long term return assumption and the Gilt scheme average returns of 10.5% p.a.
in next 3 years. What could be the shortfall in meeting this goal? (4 Marks)

a) 6.05 lakhs
b) 7.35 lakhs
c) 6.86 lakhs
d) 4.31 lakhs

Q8) Mahesh ask you to calculate his Income Tax Liability for the previous year 15-16. Mahesh would invest the max
limit permissible u/s 80c. He has worked out loss from house property to the extent of Rs. 45000 for the period.
(5 Marks)

a) 74780
b) 90230
c) 82490
d) 69100

Q9) Mahesh’s Company has deputed him to their Canada office for a period of 2 years. Mahesh can leave India
either after 2 months or latest by September 2015 for Canada. He wants to know from you by what date should he
leave India to qualify as a Non Resident in Indian for the previous year 2015-16 under Income Tax Act, 1961? (3
Marks)

a) On or before 28 September, 2015

b) On or before 30 May, 2015
c) On or before 29 May, 2015
d) On or before 29 September, 2015

Q10) Mahesh sees his Gold ETF units quoting at an attractive price of 2500 on stock exchange today. He wants to
know if he disposes of his entire stock of Gold ETF at this price. What post tax gains he would be making on this
transaction?
(2 Marks)

a) 11.47% p.a.
b) 11.17% p.a.
c) 8.96% p.a.
d) 11.84% p.a.

Q11) Mahesh wants to know about Inflation Index Bonds (IIB). In a recent issuance of 10 years bind of Face Value
1000, and real yield is mentioned as 1.44% payable annually. He ask you if the specific inflation index on maturity
rises to 160 against a reference of 100 today, what impact would be on principle repayment and annual coupon? (2
marks)

a) The inflation adjusted principle would be 1600 on maturity; the regular coupon however would be 1.44% of
Face Value of bond, in this case 14.40 annually.
b) The inflation adjusted principle would be 1600 on maturity; the annual coupon would be 1.44%
periodically adjusted principle amount, as computed on respective coupon dates.
c) The principle amount repayment would be Rs. 1000 only, the annual coupon would increase in tune with
inflation index i.e. the last coupon in the presumed case might be 2.35.
d) The principle amount repayment would be 1000 only; the annual coupon would be 1.44% above the
cumulative annual inflation rate e.g. the last coupon in the presumed case might be Rs. 61.44.