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 provide
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 priced
at Rs.975.48. Given an appropriate discount rate of 10%, should Roop hold or sell the bond?
time to maturity 3
Coupon 75 pv ₹ -937.83
face value 1000
cmp 975
Discount rate 10%
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?

₹ -38,554.33

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?
post tax return 10% Inflation rate 9.87%
Real rate of retu((1+return)/(1+inflation))-1 0.1183%
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?

FV 75000
rate 0.07
n 10
PV ₹ -38,126.20

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?
26.3754250608 nper 26.3754250608
PV 4000
FV 18600
Rate 6%

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?

pv 75000
fv 0
rate 12% 0.01
time 2 24
pmt ₹ -3,530.51

Sum 9
At the end of a holding period of 3 years, you expect that the share price would be 34.7fv 34.73
What is the present value of this expected price? Your opportunity cost remains 12% int 12%
pv (₹24.72)

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?

r 15%
pmt 55000
nper 6
Fv 850000

pv (₹575,625.00)
rate 5 4.5 5.5
pv 360000 ₹ 459,461.36 ₹ 572,572.45
pv 360000 For first years For next five YeaFor next Five Years
n 5 ₹ 459,461.36 ₹ 572,572.45 ₹ 748,329.29

₹ 561,246.97

15%
Car House
fv 525000 1000000
time 5 10
₹ -261,017.79 ₹ -186,907.15
₹ -447,924.94
Problem 1
Poonam aged 35 years invested Rs. 100000 in a saving instrument . The interest
during the first 3 years is 8% p.a. and thereafter 6% pa. What amount would
she get on retirement at the age of 58 years?

8% 6%
pv 100000 ₹ 125,971.20
₹ 125,971.20 ₹ 404,006.70

Problem 2
You determine that you would require Rs2000000 at 58 when you retire.
What is the monthly saving that you need to do if you are 40 today
and the rate of interest is 10% pa
fv 2000000 Monthly
rate 10% 0.008333333333333
18 216
₹ -3,330.21
Problem 3
Mr Ram aged 45 saves at 9% pa , Rs2,00,000 at the beginning of the year
for the first 8 years and then stops saving on account of certain financial
problems. On retirement at the age of 65 years, he intends to keep aside
a sum of Rs 500000 out of the accumulated amount of the above savings
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.240,000 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
assuming no provision for inflation thereafter, then what is the annual
amount of income he should manage for after retirement?
Ans: Rs. 731452

Theres no amount being accumulated hence we wont have any

pmt in this sum.
We are saying, if hes spending x amount now, after accounting for
inflation and increase in std of living, how much wouldhe spend at
the age of 55?
That we find using fv
 inflation and increase in std of living, how much wouldhe spend at
the age of 55?
That we find using fv

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
accumulated amount should he have on retirement for such an arrangement?
Assume his investment on retirement would provide a yield of 6%.
Rs13236410.58

In this case, for rate of interest, we need to find the real rate of
interest. Therefore we use rr. rr = 1+return / 1+inflation
1+6% / 1+ 3%
Corpus will give 6% return but inflation will erode the value hence
we do real rate of return. Whenever we have a spending, we use
real rate of return.
When we have saving we can take absolute yield

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

Whenever there is a saving, its beginning of month assumed

Whenever there is loan repayment, its end of the period.

Use this if nothing is mentioned.

Here, we first calcu

using a savings am
accumulated a cor
For calculation of P
real rate. Then in p

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

Factors to be considered - Retirement age, and when to begin

paying the premiums. Hence we need N
We need life expectancy also, to know how many years we will get
the pension payment for.
We also want the rate of return.
 Factors to be considered - Retirement age, and when to begin
paying the premiums. Hence we need N
We need life expectancy also, to know how many years we will get
the pension payment for.
We also want the rate of return.

Problem 8
Nirav wants to retire at the age of 45 and he wants to maintain
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
every year to meet this plan? His present investment is Rs.1000000.

We first take 325000, take fv of that value at his retirement age at

4% inflation rate, since its the spending.
He will invest 14182819 immedietely after retirement, therefore
we have taken it as beginning of period for the corpurs calculation

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) FV of 45,000 p.a after 10 years at 9%

2) FV of 72,000 p.a
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.
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
current age 45 Lumsum fv invested for 12 yrs now at 9%
int 9% fv2
pmt 200,000.00 Set aside
nper1 8 Fvremain
fv (2,404,207.29) Pmt

Current Age 30 years

Annuity at beginning 240,000.00
Raise std of living 2% each year
Retirement 55 years
Inflation 3%
% of std living @retirement 90%
5%

FV ₹812,725.19
90% of fv ₹731,452.67
PV at 55
Retirement 55
Life exp 25 years
Amount needed every year ₹731,452.67
Investment yield 6%
Inflation 3%
Real rate of return 2.9126%
PV at 55 (₹13,236,410.53)

Part A Part B
Current age 40 Current age
Retirement age 65 Retirement age
Life exp age 75 Life exp age
Years after retirement 10 Years after retirement

Monthly amt needed after ret 15,000 per month Yearly amt saved since age 40
Inflation 4% Inflation
Rate of return 7% Rate of return
Real rate of return 2.88% Real rate of return
Corpus required (₹1,565,782.33) Corpus required

Here, we first calculated the corpus neededf as per his expenses for 10 years. Then we calculated how he will achieve that
using a savings amount. Therefore if he saves 30,000 per year at end of year for 25years (age 40 to age 65), he will have
accumulated a corpus amount of more than the amount needed to meet his expenses.
For calculation of Part A, we took real rate of return because it was the case of spending, and in case of spending we take
real rate. Then in part b, we are saving, and hence we took the rate of yield mentioned, and not real rate of return

Pension 120,000
Lumsum 1,600,000
Premium 50,000
 FV of Expenses adjusted for Inflation Amount to be spent every year (Adj for inf
Retirement age 45 Life exp age
Current age 30 Years to life exp
Annual spending currently 325,000 Inflation
Inflation 4% Expected rate of return
FV of Spending at 45 ₹585,306.64 Real Rate of Return
Current age
Corpus needed at 45
Current investment

Amt to be invested to save corpus

Amt invested as 10,00,000 is taken as minus in the calcula
For saving purpose we take entire yield whereas for spen
Therefore if he saves 424864 per year, he will be able to s

Corpus needed 5,000,000

Current age 30
Retirement age 55
Inflation 5%
Int rate 9%
Amt saved for 10 years 45,000 p.a
Fresh int rate 12%
Saving p.a till death 72,000

Life for investment 1 (45,000) 10 years

Working Life (for 72,000) 15.00 years

FV ₹745,213.20
Reinvest this at 12% ₹2,714,426.02
FV2 ₹3,006,236.19
Total Corpus ₹5,720,662.21
Current age 28
Deposit per month 5,000
Retirement age 60
PPF return 8.50%
Gratuity at retiremenmt 900,000
Investment rate after ret 9.25%
Present spending 240,000
inflation 9%
Retirement corpus 90%
Life expectancy 85

Difference b/w current and ret 32

FV of deposit at retirement ₹9,977,566.24
Gratuity recd. 900,000
Total amt at retirement ₹10,877,566.24

Present spending at 28 yrs old ₹240,000.00 Only when theres loan or sum tells us its end of
90% of Pre Retirement spendi ₹216,000.00 period, only then we take end of period.
FV of spending at ret ₹3,404,879.02 If not, we alwayus take beginning of period
Real rate of int 0.23%

Difference b/w Ret and life ex 25

PV of spendings till life exp ₹82,825,026.53

at 60 years old
r investments are worth Rs. 1,75,000. How much more should he save every month given that her investments will fetch a return

ishes 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 re

to 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
₹6,762,229.17
500000
₹6,262,229.17
₹515,065.73
tB
40
65
75
10

30,000
4%
7%
2.88%
(₹1,897,471.13)

how he will achieve that

o age 65), he will have

ase of spending we take

eal rate of return
 ₹585,306.64
85
40
4%
7%
2.88%
30 years
14,182,819.48
1,000,000.00

(₹424,864.82)
aken as minus in the calculation of Amt to be invested to save corpus
ntire yield whereas for spending purposes we take the real rate of return
per year, he will be able to spend 585306 per year every year after retirement
tells us its end of
of period.

ng of period
stments will fetch a return of 9% p.a.?

ars 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 such as
of his commitments such as childrens’ education and marriage will be fulfilled and therefore he requires only 60% of the expen
res only 60% of the expenses from then on. How much money will he require at the age of 60?