1.

Sum on retirement
Mr Ram spends Rs. 3,60,000 per annum to meet his annual living expenses
He wishes to maintain the same standard of living after retirement which will
be after 15 years. Inflation in the first 5 years is 5% p.a. And in the next 5 years it will be 4.5%
while in the following 5 years it will be 5.5 % p.a. Mr.Ram feels that at the age of 60
most of his commitments such as childrens education and marriage will be fulfilled and
therefore he requires only 75% of the expenses from age 60 onwards
How much money will Ram require at the age of 60 ?

2. SUM on future planning

Sulekha needs Rs.5,25,000 after 5 years and Rs.10,00,000 after 12 years to meet two goals
of buying a car and a house. The rest of the money required to buy a house will be financedby
her employer. She has a long term horizon and can therefore invest in equity which will provi
her a 15% return on her investments. What is the lumpsum amount she should invest now in
order to meet her two goals at the appropriate time?

3.Sum on bond PV
Roop owns a Rs.1000 face-value bond with three years to maturity. The bond makes annual
interest payments of Rs.75, the first to be made one year from today. The bond is currently pr
at Rs.975.48. Given an appropriate discount rate of 10%, should Roop hold or sell the bond?

Sum 4
Puneet wishes to receive Rs.1,00,000 in 10 years time at an annual interest rate
of 10%, what is the amount of money he has to invest now to achieve his goal?

Sum 5
Vishal invested in a corporate bond with a post tax return of 10% and
the inflation rate is 9.87%. What is the real rate of return?

real rate= ((1+return)/(1+inflation))-1

SUM 6
If Arti needs Rs75000 in 5 years' timefor the down payment of her house
what is the amount she should deposit now assuming an interest rate of 14%
, compounded semiannually?

Sum 7
Abhishek started investing with an initial investment of Rs.4000. The investment
is now worth Rs. 18,600. Assuming the annual rate of return on investment
is 6% how many years has abhishek been invested for?
26.375425060812

Sum 8
A commercial bank will give you a loan of Rs.75,000 for 2 years to buy a car.
The loan must be repaid in 24 EMIs. The annual interest rate on the loan is 12%
of the unpaid balance. How large are the monthly payments?

Sum 9
At the end of a holding period of 3 years, you expect that the share price would be 34.73.
What is the present value of this expected price? Your opportunity cost remains 12%

SUM 10 P/E
If the current market price of Reliance is 1000 and the EPS is 20, what is the P/E?
SUM11 EPS
If the current market price of L&T is Rs800 , net profit is Rs200 crore and the no. of
outstanding shares in the market is 15 crores, what is the EPS?

Sum 12
Irfan proposes to purchase a property for giving it on rent. (ignore taxation)
He expects to receive Rs55,000 in net receipts each year for 6 years and to sell the property
for Rs.8,50,000 at the end of the 6 year period. If the expected return is 15% what
would be the value of the property?
 Particulars First 5 years 5-10 years 10-15 years
PV 360000 ₹459,461.36 ₹572,572.45
FV ₹459,461.36 ₹572,572.45 ₹748,329.29
will be 4.5% rate 5% 4.50% 5.50%
nper 5 5 5
pmt 0 0 0
75% of FV ₹561,246.97

Goal 1 Goal 2 Lumpsum

PV=? (₹261,017.79) (₹186,907.15) (₹447,924.94)
FV 525000 1000000
nper 5 12
rate 15% 15%
pmt 0 0

MV Gain if sold at MV
PV (₹937.83) 975.48 ₹37.65
FV ₹1,000.00
nper 3
rate 10%
pmt 75

PV=? (₹38,554.33)
FV 100000
nper 10
rate 10%
pmt 0

bond post tax rteurn 10%

inflation rate 9.87%
Real Rate 0.12%
FV 75000
n 5
nper 10
rate 7%
pmt 0
PV (₹38,126.20)

PV 4000
FV 18600
Rate 6%
pmt 0
nper 26.3754250608

PV 75000
n 2
installment 24
rate 1.00%
pmt (₹3,530.51)

FV 34.73
n 3
rate 12%
PV (₹24.72)

MP 1000
EPS 20
P/E 50
MP 800
Net Profit 200 cr
No of shares 15 cr
EPS 13.3333333333
P/E 60

55000 55000 55000 55000 55000 55000

850000
6 ₹ 575,625.00
15%
₹ 606,846.99
905000
Problem 1
Poonam aged 35 years invested Rs. 100000 in a saving instrument . The interest PV
during the first 3 years is 8% p.a. and thereafter 6% pa. What amount would FV
she get on retirement at the age of 58 years? rate
n
pmt

Problem 2
You determine that you would require Rs2000000 at 58 when you retire. FV
What is the monthly saving that you need to do if you are 40 today n
and the rate of interest is 10% pa rate
pmt

Problem 3
Mr Ram aged 45 saves at 9% pa , Rs200000 at the beginning of the year 200000
for the first 8 years and then stops saving on account of certain financial 9%
problems. On retirement at the age of 65 years, he intends to keep aside 8
a sum of Rs 500000 out of the accumulated amount of the above savings ₹ 2,404,207.29
as liquid money for emergencies and to invest the balance amount at 6%
pa providing withdrawal of a fixed amount at the beginning of every year
for 20 years . Find the amount of annual withdrawal?

Problem 4
Rajesh aged 30 years is working in an MNC and wishes to set aside some
fixed amount at the beginning of each year towards retirement planning.
He is currently spending Rs.240000 pa and wishes to raise his standard of
living by 2% per year until his retirement at the age of 55. The average
rate of inflation is expected to be 3%all these years. If he wants to maintain
90% of his standard of living that he would be enjoying on retirement Rate of increase
assuming no provision for inflation thereafter, then what is the annual n=
amount of income he should manage for after retirement? pmt
Ans: Rs. 731452 at 90% ₹ -731,452.67

Problem 5
In the above case, if Rajesh's life expectancy on retirement is 25 years
and he wants the same annual income adjusted to inflation as envisaged
in question no. 4 above for all the years in advance after retirement , what real rate of return
accumulated amount should he have on retirement for such an arrangement? FV
Assume his investment on retirement would provide a yield of 6%. PV
Rs13236410.58

Problem 6
Ms Madhu is 40 years old and will retire at 65. Life expectancy is 75 years.
She will require Rs.15000 in the first month after retirement . Inflation
is 4% pa. and rate of return is 7% pa. What is the corpus required to meet
the expenses after retirement . Will the corpus be enough to fund her retirement
if she saves upto Rs.30000 pa at the end of the year?
Rs1565782, y

For Savings For Spending

pv 0
Fv ₹ 1,897,471.13 end of the year
rate of return 7% Rate of interest only
Annual savings, from
n 25 40 to 65 years
pmt -30000

Problem 7( an advertisement)
Lifetime Pension Rs1.2lac p.a and 16 lac for your child for just Rs50k pa
plus benefits U/s 80c and 10D

Starting age ending age is not given , hence cancel

Problem 8
Nirav wants to retire at the age of 45 and he wants to maintain life expectancy
his present standard of living. He spends Rs 325000 a year. He is
expected to live up to 85 years. Inflation is 4% and the expected return is
7% pa. How can he achieve this? He is at present 30 years old. What
is the nest egg required at age 45 and what amount shall he save pv of 325000
every year to meet this plan? His present investment is Rs.1000000. fv of 1000000

For Savings For Spending (Step 2)

Spending (present
pv 1000000 value)

Fv ₹ -2,759,031.54 end of the year Inflation

rate of return 7% Rate of interest only n

Annual savings, from
n 15 40 to 65 years FV
pmt 0 pmt

Problem 9
Kalpesh wants to accumulate Rs.50 lacs when he retires. He is 30 years and
wants to retire at 55 years. Interest rate 9% pa and inflation is 5% compounded
yearly to be done on annuity certain basis. After 10 years of his saving
Rs.45000 pa., Kalpesh realises he can now earn 12% pa. on fresh investment
and also maintain a saving amount of Rs72000 p.a. for the rest of the working life
Will he be able to accumulate the amount required? What will his corpus be?

1. Old investment for 10 years

Here PMT will 45000 as its invested
every year 2.Fresh Investment for 15 years
PMT 45000 pmt 72000
n 10 n 15
r 9% r 12%
FV ₹ 745,213.20 FV ₹ 3,006,236.19
PV 0 pv 0

Total amount saved (2+3) ₹ 5,720,662.21

Problem 10 (Practice)
Mr.Bimal who is aged 42 years has got a contractual assignment in UAE
for a period of 15 years. He has been on his assignment for the past 4 years
and has already saved Rs 7lakh every year. He now plans to save
Rs 10 lakhs for the balance period of his assignment abroad and then
come back to India and live a retired life.
A. If his savings earn an interest of 7% pa during the accumulation stage,
how much accumulated money will he have when he returns to India?

Problem 11
B. If his life expectancy is 85 years and the accumulated savings earn a return
of 8% pa. , how much money can he spend per annum to sustain himself for the
balance period of his estimated life span?

Problem 12
If the estimated expenses for his family are Rs.360000pa. And the rate
of inflation is 6%, then how long will his accumulated savings last?

Problem 13
Rupinder aged 28 years has opened a PPF in State Bank of patiala and deposits Rs5000
in his account every month out of his income. He will retire at the age of 60 years. PPf gives
him an average return of 8.5% . On retirement he will also get a gratuity of Rs.9 lacs after tax
deductions. He plans to invest the retirement corpus and PPF maturity amount available in an FD
bearing 9.25% pa interest.At present he spendsRs2.4 lacs annually and the inflation rate is 9%.
After retirement he would require 90% of pre-retirement expenses. Does he have to save more
to take care of retirement need? Life expectancy be assumed as 85 years.

1.PPF savings 2.Add GRATUITY

pmt 5000 900000
r 8.50% pa
n 32
pv 0
FV ₹ 9,977,566.24 ₹ 10,877,566.24
Corpus

Problem 14
Sushil has an accumulated amount of Rs.75 lakhs at the time of his retirement.
Also just before retirement, his household expenses are Rs.2.4 lakh pa
and he wishes to maintain the same standard of living after retirement .
If inflation is 6.5%pa and interest on investment is 9% pa , how long would this
money last if he gives Rs25lakh to his son out of the accumulated amount?

Problem 15
Kalpesh decides to accumulate Rs50 lakh when he retires. He is 30 years old at present
and wants to retire at the age of 55 years. Assume interest rate is 9% and inflation
is 5%. If Kalpesh could save only Rs.45000 pa for first 10 years, how much does he need
to save for next 15 years to meet his retirement nest egg?

Problem 16
Avinash pays his mortgage of Rs.12 Lakh for 15 years at an interest rate of 1% per month.
Avinash makes the payments on a monthly basis. What is the total amount of interest
Avinash will pay over the term of the mortgage?

Problem 17
Mira aged 30 years saves Rs.15000 per year (at the end) in bank FD earning 8.25% p.a.
compounded annually until she retires at 58. Life expectancy is 80 years. What is the
Corpus on the date of retirement? What is the fixed amount she can withdraw at the
beginning of each year until 80 in case she wishes to exhaust her corpus completely?
1491654, 137767
Problem 18
What will be the buying power of Rs. 5000 after 15 years if inflation is 8% pa?
Ans: 15860

Problem 19
Rekha is 20 years old and wants to retire at 45. Her life expectancy is 70 years.
She requires Rs55000 in the first month of her retirement. Inflation rate is 4% pa
and the rate of return is 6% pa. What will be the saving per year required in order to meet this
Ans 239081

Problem 20
A client has the need to provide for his childs college education costs. He envisages
that four annual payments of Rs.20000, in current monetary terms would be needed
beginning 15 years from now. Assumimg level of inflation rate at 5% per annum and
that the fund earns 8% pa returns throughout; calculate the present value to be placed
on this liability when carrying out a needs analysis for this client.
Rs51000

Problem 21
The average inflation over the last three years is 8.5% p.a. You invested Rs.1 lakh
in a security 3 years ago which you have redeemed for Rs.1.3 lakh with simple interest.
What real rate have you obtained from investment?

Problem 22
Anupama dreams of owning a car worth Rs5,00,000 five years from now. At present her investments are worth Rs. 1,

Problem 23
Raghav aged 45 spends Rs. 550000 per annum to meet his annual living expenses. He wishes to maintain the same st
Problem 24
Ahmed proposes to purchase a property for giving it on rent( ignore taxation) expecting to receive Rs55000 in net rec
 100000 ₹125,971.20
₹125,971.20 ₹404,006.70
8% 6%
3 20
0 0

2000000
216
1%
(₹3,330.21)

FV 500000 fv
12 years
9%
₹ -360,574.46 pv

Current Spending Lifestyle increase No of years inflation

240000 2% 25 3%

216000
5%
25
0.00 because nothing is being (inflow)

Retirement after Life expectancy Inflation Investement

25 25 3% 6%

2.91% 1+r/1+inflation - 1
₹ 0.00
₹ 13,236,410.53
 Inflation 4%
Rate of return 7%
FV of 30000 real rate of return 2.9%
PV of 15000
15000 30000
PV ₹ -1,565,782.33
FV ₹ -13,166,723.49

40 inflation 4%
return 7%
real rate of return 2.884615384615400% Step 1
 pv fv

ending (Step 2) Step 3 - Corpus

325000 FV 0

4% PV(to find) ₹ 14,182,819.48

15 Real rate 2.88%

₹ -585,306.64 n 40
0 PMT ₹ -585,306.64

3.Value accumulated last 10 years invested for next 15

years
PV ₹ -745,213.20
n 15
r 9%
FV ₹ 2,714,426.02
PMT 0
 Real rate

3.Spending money required after retirement 4. Total Corpus required to meet retirem
PV ₹ -240,000.00 PV
inflation rate 9% Real rate
pmt 0 pmt
n 32 n
FV ₹ 3,783,198.91 FV

After retirement he
needs 90% of this ₹ 3,404,879.02 Hence, the corpus of Rs 1,08,77

10877566.23615
nvestments are worth Rs. 1,75,000. How much more should he save every month given that her investments will fetch a return o

hes to maintain the same standard of living after retirement at the age of 60. Inflation in the first 6 years is 5%p.a. And in the rest
receive Rs55000 in net receipts each year for 5 years and to sell the property for Rs.8,50,000 at the end of the
 1. Calculate real rate
2. Calculation of amount requ
retirement
Step 4 - How much to Save (calculate future value of 3,25
because thats the rate at whi
This means to lead the same
FV ₹ -14,182,819.48 around 5.85L.
3. Calculate the Corpus- To sp
Savings at the how much will he require to m
beginning of At the age of 45 he should ma
period PV(to find) ₹ 1,000,000.00 spend 5.85L
4. How much to save yearly?
actual
rate of
Real rate 7.00% interest Note :: Loan payment - end o
saving on investment - beginn
n 15
PMT ₹ 424,864.82
 0.229%

al Corpus required to meet retirement needs 37,83,198 after retirement

0
0.229%
 ₹ -3,404,879.02
25
₹ 87,707,205.98

Hence, the corpus of Rs 1,08,77,566 is not enough for the spending of Rs 87707205

87707205.97644
investments will fetch a return of 9% p.a.?

6 years is 5%p.a. And in the rest of the years it will be 5.5% p.a. Raghav feels that at the age of 60 most of his commitments suc
the end of the
1. Calculate real rate
2. Calculation of amount required for expenses per year at
retirement
(calculate future value of 3,25,000 with the inflation rate of 4%
because thats the rate at which expenditure will rise)
This means to lead the same standard of living, he will then spend
around 5.85L.
3. Calculate the Corpus- To spend an amount of 5.85L every year
how much will he require to maintain as corpus?
At the age of 45 he should maintain certain amount to be able to
spend 5.85L
4. How much to save yearly?

Note :: Loan payment - end of period

saving on investment - beginning of period
most of his commitments such as childrens’ education and marriage will be fulfilled and therefore he requires only 60% of the ex
equires only 60% of the expenses from then on. How much money will he require at the age of 60?