SVKM’s NMIMS

Anil Surendra Modi School of Commerce

Programme: TYBBA Batch: 2018 - 2021 Semester: VI
Academic Year: 2020 – 2021
Subject: Financial planning & wealth management Marks: 50
Date: _________ Time:-________
Final Examination/ Re-Examination Duration: - 2 Hrs

N.B.:-
1.      Question no.01 is compulsory and carries 20 marks
2.      Attempt any 3 questions from question no.02 to Q.5, carrying10 marks each.
3.      Question paper is in excel format. It has be downloaded through link provided.
4.      Entire paper is in single workbook however, there are separate sheets for each question / sub question.
5.      Students have to solve in the same worksheet in which question appears.
6.      Solution has to be outlined with thick borders and questions area should not be disturbed.
7.      Working notes have to be prepared in detail, wherever necessary, for every question or sub question in the sa
8.      Upload the same excel workbook, which is downloaded after attempting the answers to questions.
9.      Access to Internet sites, other than those required to conduct exam are prohibited.
 Semester: VI

Marks: 50
Time:-________

on / sub question.

or sub question in the same work sheet.

o questions.
Question 1 …………………..…………………………………………………………………………...…. (
Mr. Pankaj (Reference date: 31st March, 2021)
Pankaj Joshi, aged 34 years, is working with reputed pharmaceutical company as an international
business development manager since 2013. He is staying in his owned house at Mulund(w), Mumbai.
His wife Anupama, aged 32 years is an ex-banker and classical dancer.
She has started her own dance academy and earned Rs. 6 lakh net profit in the previous financial year.
They have a son, Rajat of age 6 yrs and a daughter, Harshali of age 4 yrs.
Pankaj earned following monthly salary for the FY 20-21:
Basic salary Rs. 55000
D.A. 50% of basic
Transport allowance Rs 2500
Special allowance Rs 12000
City compensatory allowance Rs 700
Additionally Pankaj is entitled to receive a performance bonus of Rs 85000 for this year.
The family’s monthly household expenses are 43000 including festivals, travelling and holydays.
He also needs to make Personal loan repayment of Rs 6300.
Further, Pankaj contributes to EPF Rs 4500 per month and pays Rs 47000 towards life insurance premium
The life insurance policies consists of two endowments and one ULIP policy.
The total life insurance cover under these policies is Rs 14,00,000.
For medical expenses of self and family, Pankaj has company’s mediclaim policy.
The present value of assets is as follows:
Assets Value (Rs)
Residential plot in Pune 18,00,000
ESOP’s 8,00,000
Life Insurance Policy(Sum assured) 4,00,000
Equity shares 90,000
Equity Mutual funds 2,10,000
Employee Provident Fund 2,97,000
Public Provident Fund 1,24,000
Cash Balance 60,000
National Savings Certificate 95,212
(Maturity date: 15 Jan 2022)
Note - Money bank policy was taken for 20 years on 1 Apr 2013
Pankaj’s parents are retired now and financially they are dependent on him.
Parents are staying in home town, Indore; in their owned house which is in the name of his father, Ashok Jo
The house was brought by Mr. Ashok Joshi in August 1989, the current market value is 21 lakh.
Pankaj intends to achieve financial goals in required timeframe and would like to plan his finances.
His financial goals are expressed in today’s value as follows:
1.      To build retirement corpus at the age 60 for comfortable post retirement life with spouse.
2.      To accumulate funds for the higher education of both the children when they complete 21 years of ag
The present cost is Rs 4 lakh p.a. per child.
3.      To buy 2BHK in next 5 years which is presently valued Rs 70 lakhs
4.      To buy a new hatchback car in next 6 months which costs Rs 6.50 lakh
5.      To make provision for children’s wedding which may be expected to happen at the age of 28 for both
today’s estimated cost for wedding is Rs 6 lakh
Assumptions:
1.      Risk free rate of return @ 6% p.a.
2.      Rate of return on equity/equity mutual funds @ 14% p.a.
3.      Rate of return on debt/ bonds @ 8% p.a.
4.      Inflation @4% p.a.
Life expectancy
Pankaj : 78 year’s
Anupama : 82 year’s
Questions:
1)       Pankaj have it in mind to arrange for the present household expenses (inflation linked) post retiremen
lifetime. For accumulation of retirement corpus he intends to start annual investments from 1st May 2
till one year before his retirement.
What approximate surplus/shortfall would be available with Pankaj at the time of his retirement in su
Assume Pankaj’s investments earn him a return of 10% p.a. throughout including his post-retirement
2) Pankaj wants to compute his ideal life cover adjusted with inflation and till Anupama is alive.
What approximate amount of life insurance cover is required by him?
Assume the proceeds of such a cover would be invested in a Fund which would give a return of 9%
3) Pankaj is investing Rs 2500 at the beginning of every month in two systematic investment plans,
for higher education of his children in equity mutual funds.
He is expecting to accumulate the corpus of Rs 15 lakh for son and Rs 20 lakh for daughter.
How much time does it required to achieve it?

Solution to Question 1
Current age of Pankaj 34
Household expenses ₹ 43,000.00 monthly
₹ 516,000.00 yearly
Inflation rate 4% yearly
0.33% monthly
Retirement age 60
Life expectancy
Pankaj 78
Anupama 82

No of months 312
Inflated expenses at 60 ₹ 119,216.20 p.m
₹ 1,430,594.41 p.a
₹ 31,473,077.00

Current date 31st march 2021

Investing from 1st May 2021
Investing till 1st may 2046

Investing 5000 p.m

Rate of return 10%
No of months 300

Accumulated amount ₹6,689,451.74

…………………...…. (20 Marks)

n international
lund(w), Mumbai.

ous financial year.

and holydays.

ife insurance premium

e of his father, Ashok Joshi.

ue is 21 lakh.
an his finances.

ith spouse.
complete 21 years of age.
at the age of 28 for both children’s;

n linked) post retirement, till Anupama’s

estments from 1st May 2021 with Rs. 5,000 p.m.

e of his retirement in such a situation?

ding his post-retirement period.
nupama is alive.

uld give a return of 9% p.a.

c investment plans,

h for daughter.
Question 2 …………………..…………………………………………………………………………...…. (10 M
Mr. Akshay Nadkarni is 28 years old. He works as a senior product designer. Not very well versed with Finance,
he is unsure of his financial position. So far, all his financial decisions have been made after consulting his colleagues at
But he does not feel very confident about those decisions. Now that he is about to get married, he feels even more
responsible to ensure that his finances are in order. He approaches you, an expert in finance, to assess the health of his
He provides you the following information. Calculate the following WM/FP ratios using the given information
and also comment and analyze the same. What do they tell you about Mr Akshay's financial health?
Given information:
The client likes to maintain a high standard of living and eats out often.
The client's monthly expenses are Rs. 50,000 (inflation adjusted). Annual expenses are Rs. 600,000 (inflation adjusted).
This includes his household expenses as well as luxury expenses such as streaming platform subscriptions and gym mem
The client's financial assets only consist of his long-term investments.
All the other assets have other uses such as insurance, which have not been purchased from an investment point of vie
His post tax annual Income is Rs. 18,00,000. His annual savings are estimated at Rs 4,80,000 after meeting all expenses,
payment of liabilities and accounting for existing investment outflows.
By virtue of his employment at a large, registered company, he has an Employee Provident Fund account with an accum
balance of Rs. 320,000. Unsure of the underlying risk of the EPF account, the client also invested in Public Provident fun
The tax deduction available on his PPF investments is certainly a benefit that he enjoys .
The PPF account balance is Rs. 6,00,000 as of now.
After reading about it in the news, Akshay invested in a 20 year pension plan from the NPS-Tier 2 scheme,
whose market value as of now is Rs. 350,000.
The client has a Term Insurance policy with a reputed private insurance company.
At the time of purchase, this insurance company had the highest claim settlement ratio in the industry.
The sum assured of the term insurance policy is Rs. 60,00,000.
Enticed by an insurance policy broker, he purchased an endowment plan whose sum assured is Rs. 5,00,000.
For his MBA in product design, the client had taken a loan from a relative. The relative expects the loan to be repaid in t
He had also taken an 10 year auto loan to purchase the car that he drives to work.
Client's balance sheet (Additional information)
ASSETS LIABILITIES
Cash accounts Short-term debt
Savings 50,000 Credit card debt
Short Term Fixed Deposit 150,000 Loan from relative for education
Liquid MF 100,000 Total
Total 300,000 Long-term debt
Use assets Car loan
Car value 400,000 Total
Total 400,000
Investment accounts TOTAL LIABILITIES
Mutual funds 900,000
Shares 100,000
Gold 10,000
10 year FD 200,000
Total 1,210,000
TOTAL ASSETS 1,910,000
Calculate and analyse the ratios:
1. Liquidity ratio (2 marks)
2. Short term debt ratio (2 marks)
3. Solvency ratio (2 marks)
4. Net Worth ratio (2 marks)
5. Savings to income ratio (2 marks)

Solution to Q.2
1) Liquidity Ratio
Liquid assets 300,000
Monthly expenses 50000
Ratio 6

Comment
It covers around 24 months worth of expenses.
The industry standard is 6-12 months.
This ratio seems to be favourable.
This ratio indicates the ability of an individual to meet emergencies.
Although favourable as per the industry standard, too high a number may be suboptimal since idle cash carr

2) Short term debt ratio

Liquid assets 300,000
Short term debt 1,006,000
Ratio 30%

Comment
This ratio helps us understand the short term debt repayment capacity of an individual.
The standard is 0.5:1.
Here, the ratio is 2:28:1 which means that for every rupee of debt, one has 2:28 Rs worth of
assets to pay off that debt.
The higher the ratio, the better it is.
Since it meets the industry standard, this ratio is favourable.
The client has insufficient short term solvency.

3) Solvency Ratio
Total Assets 700,000
Total Debt 1,306,000
Ratio 54%

Comment:
This ratio indicates the long term solvency i.e. the long term debt repayment capacity of the client.
It is indicative of the client's ability to pay off external liabilities using his personal and liquid assets.
The standard is 1:1. A higher ratio is favourable.
The calculation shows a debt ratio of 0.5:1. The client seems to have inadequate assets.
 Total assets excludes investments, we presume these have a long time horizon and are not intended to be u
The client can borrow and undertake additional debt if it is necessary for his/her financial goals.

4) Net Worth Ratio

Liquid assets 300,000
Personal assets 400,000
Deferred assets 1270000
Total assets 1,970,000
Total liabilities 1,306,000
Ratio 1.508

Comment
This ratio is indicative of the client's financial ratio.
Monitored over time, it would indicate the financial progress made by the client.
The higher the ratio, the more favourable it is.
The client's financial position seems to be strong considering and his liquid assets, personal assets and the pr

5) Savings to Income Ratio

Annual Savings 480000
Annusl Income(Post Tax) 1800000
Ratio 0.267

Comment
This ratio indicates the lifestyle expenditure of the client.
It is recommended that atleast 10% of gross income be saved.
This standard is being met as per the calculation.
However, a higher ratio is favourable.
This ratio should be compared with that of previous years to decide whether it has changed significantly ove
The same can be monitored.
……………………………...…. (10 Marks)
very well versed with Finance,
made after consulting his colleagues at work.
o get married, he feels even more
rt in finance, to assess the health of his finances.
s using the given information
y's financial health?

es are Rs. 600,000 (inflation adjusted).

g platform subscriptions and gym membership.

hased from an investment point of view.

Rs 4,80,000 after meeting all expenses,

Provident Fund account with an accumulated

nt also invested in Public Provident funds.

m the NPS-Tier 2 scheme,

t ratio in the industry.

sum assured is Rs. 5,00,000.

lative expects the loan to be repaid in the near future.

on)

6,000
1,000,000
1,006,000

300,000
300,000

1,306,000
may be suboptimal since idle cash carries an opportunity cost.

y of an individual.

e has 2:28 Rs worth of

ayment capacity of the client.

his personal and liquid assets.

nadequate assets.
e horizon and are not intended to be used for debt repayment.
for his/her financial goals.

quid assets, personal assets and the present value of his deferred assets.

hether it has changed significantly over time and for what reasons.
Question 3 …………………..………………………………………………………………...…. (10 Marks)
Radha, a widow, aged 40 years is presently working with a multinational company as a Business analysts and
is getting a decent salary of Rs.85,000/- a month.
She has two children. Rishi, the elder son is 14 years old and Ananya, her daughter is 8 years old.
She stays in a house owned by her late husband and has her old mother in law to be taken care of.
Her monthly household expenses, including the premiums for her insurance policies, medical bills of mother
in law and childrens cost of educations sums to up around Rs.44000/-.
She has to save money for her future goals which are as follows -
a) She plans to go along with her family on Europe tour after 5 years. In present terms, the trip is going to cost
her Rs 7,00,000. The inflation rate be taken at 4%p.a.
b) She wants her son to go abroad for his higher education. It will cost her then a total of Rs24,00,000.
This expense will get due after 7 years.
c) She also wants to save money for her daughter's marriage which will be due after 15 years.
In todays terms, the marriage should have costed her Rs10,00,000.
She has come to you seeking financial advice. She has put before you the following questions.
1. How much amount she will have to save every month to fulfill her goal of conducting a Europe trip? ……(2
2. What amount she should save every month to finance son's higher education? ………………………………
3. If she plans to save Rs 3000, every month, for the daughter's marriage, will it be sufficient enough to
meet the marriage cost?If not, what will be the shortfall………………………………………………………
4. Suppose if she manages her daughter's marriage with the amount that is accumulated as per Q.3 above,
will she be able to save any money for her retirement. What is the total corpus that will accumulate
to on her retirement, at the age of 60? (Assuming all the balance money is invested for retirement)…….. (4
It is assumed that all the money saved above, is invested in separate Equity funded Mutual plans,
which are expected to give a return of 12% all throughout the years.
Also assume that the increase in salary every year will go towards increase in household expenses and standard of living
(All calculations be rounded off to the nearest rupee)

Solution to Q.3
Current age 40
Salary 85000 monthly
Son 14
daughter 8
Monthly expenses 44000

Europe trip Daughter's marriage

n 5 years n
pv of trip ₹ 700,000 pv of cost
Inflation rate 4% p.a Inflation rate
rate of return 12% p.a rate of return
0.95% p.m
real rate of return 8% p.a real rate of return

Inflated cost of trip ₹ 851,657 Inflated cost of marriage

Savings every month ₹10,600.49 Amount saved every month
Corpus accumulated

Son's higher education Surplus or shortfall

n 7 years Shortfall Amount

fv of cost 2400000
rate of return 12% p.a
0.95%
Basic salary
Savings every month ₹18,810.15 Monthly expenses
Savings for goals

Amount left
Fv of corpus

Savings for goals

Amount left
Fv of corpus

Savings for goals

Amount left
Fv of corpus

Amount left
Fv of corpus

Total corpus accumulated

………...…. (10 Marks)
as a Business analysts and

is 8 years old.
taken care of.
s, medical bills of mother

ms, the trip is going to cost

al of Rs24,00,000.

cting a Europe trip? ……(2 marks)

………………………………….(2 marks)
sufficient enough to
……………………………………………….(2 marks)
ated as per Q.3 above,
at will accumulate
ed for retirement)…….. (4 marks)

penses and standard of living?

15 years
1000000
4% p.a
12% p.a
0.95% p.m
8% p.a

₹ 1,800,944
 3000 p.m
₹1,414,373.50

shortfall

₹386,570.01

40 current
45 Europe trip
85000 monthly 47 Son's education
44000 55 Daughters marriage
₹32,410.65

₹8,589.35 8
₹690,079.63

₹21,810.15

₹19,189.85
₹514,490.83

₹3,000.00

₹38,000.00
₹5,910,825.65

₹41,000.00
₹3,293,992.10

₹10,409,388.22
Question 4 …………………..………………………………………………………………...…. (10 Marks)
You are an insurance agent being invited by two brothers of a Kapoor family in Ludhiana to discuss a life insurance plan
Elder brother is Mr. Ram Kapoor aged 68 years, fit & healthy, living with his wife aged 65, and two depended
grandchildren of his deceased son.  
Mr. Ram is a prominent motivational speaker and is always the priority in the corporates to be invited as a key speaker
although having high professional fees is Rs. 1 lakh per lecture.
Mr. Ram has recently bought a new house taking a home loan of Rs. 50 lakhs.
Younger brother Mr. Shyam Kapoor aged 58 years recently took VRS from a bank because of his ill health and
unwillingness to work hard.
He is the owner of a grand bungalow worth Rs. 3 crore and having investments and a bank balance of Rs. 1 crore
without any financial obligations, Both brothers are interested in buying a life insurance of Rs. 5 crores.
Analyze the case for your priority in selling the life insurance product with special reference to dimensions of
human life valuation.

Solution to Q.4
…………...…. (10 Marks)
a to discuss a life insurance plan.
5, and two depended

es to be invited as a key speaker

use of his ill health and

ank balance of Rs. 1 crore

e of Rs. 5 crores.
ence to dimensions of
Question 5 …………………..………………………………………………………………...…. (10 Marks
Mr. Pramod Garg aged 25, is a young graduate in computer science and dynamic personality has recently
and obtained certificate in personal finance planning from a recognised body.
Mr. Garg wants to start his own investments advisory company in Ahmedabad. On initial market research
he observed that no. of unorganised & traditional advisory firms are exits in the locality and most of the in
are blind followers of such firms and making investments without any discussion or setting any financial g
such as children education and marriage, estate, retirement etc.
How Mr. Garg should set his venture by adopting various key drivers of Financial planning & wealth mana

Solution to Q.5
…………...…. (10 Marks)
c personality has recently qualified

On initial market research survey

locality and most of the investors
n or setting any financial goals

l planning & wealth management.