SVKM’s NMIMS

Anil Surendra Modi School of Commerce

BSc. Fin. Sem: VI Total Marks: 50

Subject Name: Financial Planning and Wealth Management

No. of Hours: 2 (Two)

Notes:

a) All questions are compulsory

b) Step by Step working is compulsory for all Numeric questions
b) Maximum marks are indicated in each worksheet
c) Answers to each question is to be solved in the same worksheet itself and in the same Excel file itself
d) The Ms Excel file containing your answers should be UPLOADED as per instructions of the Examination department and Invi
e) Students should save their files regularly during the exam
f) Normal and Scientific Calculators only are allowed, all others not allowed
g) Please download the Excel file on desktop, solve the paper and then uploaded the downloaded file as per instructions by
mination department and Invigilator

ded file as per instructions by the exam department

Q. 1 Case Study – Rohin Kumar (Reference date 24th January, 2018)
Rohin Kumar, aged 30, life expectancy 75, is working with a leading Indian corporate as a project mana
provided by his employer. His wife, Kashish, aged 29, life expectancy 80, is a house wife. They have two

Rohin earned following monthly salary for the FY 2016-17:

Basic Salary Rs. 30,200

D.A (forming part of Salary) 50% of basic salary

City Compensatory Allowance Rs. 300

Children Education Allowance Rs. 200 per child

Transport allowance Rs. 1,000

Further, Rohin shall also receive a performance bonus of Rs. 60,000 from his employer for this year. Ro

Rohin’s monthly expenditure for the FY 2016-17 was:

Expenses Amount (Rs.)

Housing expenses (including

traveling, holidays and 21,000
festivals)

Personal loan repayments 13,200

Total 34,200

In addition to this, Rohin Contributes to Employee Provident Fund Rs. 4,800 monthly and also pay
policies and 1 unit linked policy. The total life insurance cover under his bouquet of policies is Rs.
medical claim policy.

Assets of Rohin
Amount
Particulars
(in Rs.)
Plot of land (at native place) Present Market Value 200,000
ESOPs Present Market Value 1,600,000
Equity Shares Present Market Value 26,000
Equity Mutual Funds Present Market Value 80,000

Employees' Provident Fund Present Value 222,000

Public Provident Fund Present Value 12,000
Cash balance Present Value 10,000
 Maturity Value on
Post Office NSC 32,500
31/March/2019

Rohin currently has Rs. 4,80,000 outstanding towards his personal loan balance, for which the EMI

Rohin's father has retired from his job. He is not financially dependent on Rohin as he has opted f
their own house in Bhuj, which is in the name of his father, Dhananjay Kumar. His father receives a
With additions to his family, Rohin intends to plan his finances and wants to achieve his financia

Financial Goals*
1. To buy a house within 1 year; valued approximately Rs. 35 lakh
2. To buy a car within the next 2 months; valued approximately Rs. 4.50 lakh.
3. To make provision for children’s higher education expenses for both children at their age of 21 in lum
4. To make provision for children’s marriage expected at the end of 20 years and 25 years from now; p
5. To provide for a comfortable retirement at his age of 55.
(*expressed in today’s values.)

Assumptions:
1. Risk Free Rate of Return = 4% p.a.
2. Rate of return on Equity = 15% p.a.
3. Rate of return on Debt above 5 years (long term) = 9% p.a.
4. Rate of return on Debt in 1 to 5 years (medium term) = 10% p.a.
5. Rate of return on Debt in less than 1 year (short term) = 5% p.a.
6. Inflation = 4% per year.

Questions:

1. You have pointed out to Rohin that presently he is not adequately covered under life insurance
an amount of Rs. 6 lakh p.a., inflation linked, starting from Feb 2018, till Kashish is alive. What app
would be invested in long term debt and long term equity in the ratio 80:20 till Kashish’s age 45 a
period till her life expectancy. (Assume Investments are made at the end of the month)

2. Rohin wants to invest yearly to achieve his goals for his children's higher education. For accumu
starts investing from 1st of Feb 2018, what approximate amount should he set aside in the beginn
for Mayur and Mohin and invests till they turn 21 years of age respectively. Also, investments are m

3. Rohin’s father receives a fixed pension of Rs. 15,000 at the beginning of every month. His household
Nationalized Bank under Reverse Mortgage Scheme. He was offered fixed monthly payments at the be
value of his home. He meets his annual expenses as increased by 4% inflation every year and invests th
investment yielding 10% p.a. at the end of every year starting from this year onwards. Rohin wants to k
Expenses are done in the begin mode).

Solution:
orate as a project manager for the last 7 years in Ahmedabad. He is presently staying in an unfurnished accommodation
use wife. They have two children - Mayur (aged 5 years) and Mohin (aged 2 years).

ployer for this year. Rohin has also been recently rewarded by his employer with a good number of ESOPs.

monthly and also pays Rs. 23,900 annually as premium of his life insurance policies, which consist of 3 endowment
quet of policies is Rs. 12,00,000. Rohin and his family are also insured for their medical expenses under his company’s
nce, for which the EMIs have been included in his current expense structure.

ohin as he has opted for reverse mortgage scheme from a Nationalized Bank. At present, Rohin’s parents are residing
r. His father receives a fixed pension each month.
to achieve his financial goals within their time horizons.

at their age of 21 in lump sum; presently valued at Rs. 3 lakh each.

d 25 years from now; presently valued at Rs. 5 lakh each.

d under life insurance. Considering that he meets an immediate unforeseen event Rohin would like to provide his fam
hish is alive. What approximate amount of life insurance should Rohin be covered for if the proceeds of such a cover
till Kashish’s age 45 and the ratio would change to long term debt and long term equity to 90:10 for the remaining
he month)

education. For accumulation of fund you recommend Rohin to invest in Debt and Equity in the ratio 20:80. If Rohin
et aside in the beginning of every year to achieve his said goals. Assume Rohin maintains separate investment accoun
Also, investments are made in equity and long term debt.

month. His household expenses have exceeded his pension of late and are Rs. 16,000 per month now. He had approached
hly payments at the beginning of every month for 15 years at a rate of interest of 11.75% per annum. on Rs.40 lakh eligible
very year and invests the excess amount from his two fixed annuities i.e. fixed pension and reverse mortgage stream, in an
wards. Rohin wants to know the accumulated fund against the total liability under Reverse Mortgage after five years. (Month
 30 Marks
urnished accommodation

er of ESOPs.

consist of 3 endowment
enses under his company’s
Rohin’s parents are residing in

would like to provide his family

proceeds of such a cover
o 90:10 for the remaining

the ratio 20:80. If Rohin

separate investment accounts

nth now. He had approached a

nnum. on Rs.40 lakh eligible
erse mortgage stream, in an
tgage after five years. (Monthly
 Q. 2 Answer any 2 out of 3 questions

Mr. Avinash purchased a flat worth Rs. 50 lakh in January 2007 by availing a housing loan of Rs. 35 lakh
rate of 9% p.a. The value of his flat as in January 2013 has appreciated to Rs. 90 lakh. What approximate
a)
can he consider in his flat towards his unencumbered interest after also setting aside 15% of the apprec
taxes and other costs to be discharged on selling the unit? End Mode

Shantanu opened a PPF A/c on 28th March 2020. For the initial 10 years he will be investing maximum
beginning of each financial year. For the next five years, he will be investing Rs. 70,000 semi-annually at
He will extend his account for 3 blocks after the initial maturity. For the first block of extension he will in
month at the end of the month. For the 2nd block of extension, he will contribute Rs. 2,000 each quarte
b) quarter. For the third extension block, he will contribute Rs. 500 each month at the end of each month.
PPF is expected to give a return of 7.9% p.a. For the next 5 years PPF is expected to give a return of 7.68
PPF rates will subside by 0.5% for every block. Calculate the amount available in his PPF account at the
He has to withdraw Rs. 10 lakh in (current cost)at the end of initial Maturity to meet downpayment for h
5.5% p.a. through out. Real Estate appreciates at 7.5% p.a.

c) Explain the Need and Steps for Retirement Planning

Solution:
 2*10 Marks = 20 Marks

using loan of Rs. 35 lakh for tenure 15 years at the

0 lakh. What approximate value of home equity
aside 15% of the appreciation value towards

be investing maximum permissible limit in the

70,000 semi-annually at the end of the period.
ock of extension he will invest Rs. 10,000 each
ute Rs. 2,000 each quarter at the begin of each
the end of each month. For the initial 10 years
d to give a return of 7.68% p.a. Going forward
n his PPF account at the end of the total period if
meet downpayment for his Son's house. Inflatio is