Theory Questions

CFP FINAL LEVEL
(WORKBOOK)
CONTENTS
PART – 1 1 - 72
QUESTIONS 3
PART – 2 73 - 248
CASE STUDY - 1 75
ADDITIONAL QUESTIONS 83
SOLUTIONS 85
ADDITIONAL SOLUTIONS 95
CASE STUDY - 2 96
SOLUTIONS 105
CASE STUDY – 3 115

SOLUTIONS 125
CASE STUDY - 4 137

SOLUTIONS 145
CASE STUDY - 5 155
SOLUTIONS 163
CASE STUDY - 6 172

SOLUTIONS 181
CASE STUDY - 7 192

SOLUTIONS 201
CASE STUDY - 8 212

SOLUTIONS 219
CASE STUDY - 9 222

SOLUTIONS 228
CASE STUDY - 10 235

SOLUTIONS 243
Integrated Financial Planning Course
The Integrated Financial Planning course finally leads you to CERTIFIED FINANCIAL
PLANNERCM certification and hence it is designed to build a comprehensive financial planning
knowledge. Financial planning is the process of developing strategies to help people manage their
financial affairs to meet life goals, and considers all aspects of a client’s financial situation.
By virtue of the design of this course, you study a bit of theory, revise the concepts that you studied
earlier but most importantly do lot of practicals and numericals.
This course begins with some conceptual books and then you learn to create financial plans and apply
you knowledge from all the previous modules that you studied and finally culminate that into a
actionable financial plan.
It has 3 Modules and all these are highly theoretical in nature.
Module 1: Financial Planning Process, Principles and Practice
This module teaches candidates the Financial Planning Process, Practice Standards, Professional Skills,
Client Characteristics, Client Engagement and Communication components of financial planning
1. Establish and define the relationship with the client
2. Collect the client's information
3. Analyze and assess the client's financial status
4. Develop the financial planning recommendations and present them to the client
5. Implement the client's financial planning recommendations
6. Review the client's situation

Module 2: Engaging Clients in the Financial Planning Process
This module is about the human qualities of the financial planning process that sometimes create the
unknown difficulties contained within financial planning. The course helps you understand the
relationship between the financial planner and the client as it comes to life. You learn lot more about
the behavioral aspects of managing your clients and how to engage them in the whole process.
candidates with an understanding of how a financial planner would apply the financial planning
process within the context of a client engagement to develop and deliver a viable financial plan.
Candidates will get an appreciation for the value of professional standards of practice; recognize and
be able to apply professional skills to facilitate better communication; and come to understanding
client characteristics.
Module 3: Developing Effective Financial Plans
This course combines the above 2 and then leading you to learn the most important part of how to
actually create a financial plan. You get the framework and samples and learn various ways of making
elaborate financial plans. The course tells you what are the most critical factors when you develop
financial plans for your clients and how do you make financial plans which are effective and rewarding
for your clients.
Capstone Project: Financial Plan Assessment Project
Once you are done with the study of the modules above, you are made to do a live project which is
assigned by FPSB. The project is making an actual financial plan for a client scenario given to you. You
do the project under the guidance of mentors and this is where you actually learn to finally convert all
your learning of the whole course and bring it on a single platter.
Once your project is done, you submit the same to FPSB for assessment and it is finally evaluated by a
team of practicing financial planners who have been appointed by FPSB. Only when your project is
approved by FPSB, you are eligible to take the final exams.
Examination Framework
CFP Final exam is different from the first 3 exams that you have passed. CFP Final exam would be
Online but it will be of 50 Questions and 100 Marks.
The questions in CFP Final Exam are in 2 parts/ categories:
1. One Mark Questions
You get 25 questions of 1 mark each and these questions are generally theoretical. They come
from the 3 concept books that you studied in level 4 or may also have some conceptual questions
from previous levels. They will be all MCQs.
2. Three Marks Question
You get 25 questions of 3 marks each, meaning total 75 Marks.These questions are completely
numericals and they would be based on a case study. In your exam question, you will be given a
comprehensive Case of a person/family and his financial data. Now based on the information
given, you will have 25 questions to solve. They would take more time to solve and will require
pen, paper, calculator etc. The questions will be all MCQs only and after your solve then , you
would need to mark the right answer.
The total time allotted would be 3 Hours, which you can ideally break up as :
1 Mark Questions > 25 Questions*1 min each = 25 mins
3 Marks Questions >25 Questions*6 min each = 150 mins
And you will still have 5 mins extra to recheck.
Ideally you should be quick in solving 1 mark questions and then spend approx. 5 min on each
Question of 3 Marks.
Remember that Case Study Based Questions (3 Marks Questions) carry 75% weightage (75 out of
100 marks) and hence they are the most important.
Based on CFP Final Exam Pattern and to help you be better prepared to take the exam, this
Workbook is also divided in 2 parts.
PART 1 : Conceptual MCQs (1 Mark Questions)
In this workbook, here you have close to 200+ Questions to practice. Supplement this with the
concept books given to you and you would easily able to master this part of your exam.
PART 2 : Case Study Based MCQs (3 Mark Questions)
In this workbook, here you have 10 Comprehensive Cases and each case followed by 25 to 40
questions for your to practice. Remember, your exam will have only 1 case but since that’s not
shared in advance, hence you need to practice more case studies and understand what type of
questions generally come and how to solve them.
Use this workbook to practice and prepare for CFP Final Exams. In case you need any further
guidance, connect to ICOFP Program Manager today.
All the best !!

PART - 1
Conceptual MCQs
(1 Mark Questions)
In this part of the workbook, here you have close to 200+ Questions to practice. Supplement this with
the concept books given to you and you would easily able to master this part of your exam.
CFP Final Level: Workbook Page 1

1. There is immense need to plan our finances so that ------- is available at ---------------- to meet our
various financial goals.
a) Right time, Right amount of money

b) Right amount of money, Right time
c) Reasonable amount of money, right time
d) None of the above is true
2. Investors want the services of -------------who are knowledgeable, experienced, and trustworthy.
Individuals want to work with a-------------- who will put the client’s best interests first — above
his own goals and objectives and provide comprehensive advice. Please fill in the blank with
appropriate option?
a) Consultant
b) Insurance advisor
c) Mutual Fund Distributor
d) Financial Planner
3. Mr. X’s parents are maintaining a joint Senior Citizen Saving Scheme account in which Mr. X is
the sole nominee. Mr. X wants to know the status of the account after the demise of either of
his parents. Which of the following is not appropriate in this context?
a) The surviving parent may operate the account alone.

b) The surviving parent can receive the amount deposited and close the account.
c) Mr. X, being the nominee will automatically replace the deceased parent in the joint
account along with the surviving parent.
d) The account may be continued for the remaining term with the surviving parent as the only
holder and Mr. X as the nominee.
4. An investment analyst has told Mr. X to invest in a portfolio after evaluating on the following
parameters -

I. The performance of portfolio adjusted by the return of risk free assets over the risk of
portfolio
II. Measure of the volatility in a portfolio as compared to the entire market (index) as a whole
III. Measure of how many individual elements tend to deviate from the average
IV. Measure excess return on an investment over the benchmark with same degree of risk
V. The proportion of variability in a portfolio compare to benchmark
The analyst also used a lot of terminology which confused Mr. X. He wants to know how the
Terminology used fits into these evaluation parameters. You advise the terminology,
respectively, as .
a) Beta, Sharpe Ratio, Standard Deviation, Alpha, R-Squared.

b) Sharpe Ratio, Beta, Standard Deviation, Alpha, R-Squared.
c) Alpha, R-Squared, Standard Deviation, Sharpe Ratio, Beta.
d) R-Squared, Sharpe Ratio, Standard Deviation, Alpha, Beta.
5. You have advised Mr. X to purchase a ₹ 50 lakh Life insurance Term Plan. Mr. X wants to know
whether it is necessary to mention the details of his other Life Insurance policy purchased from
different insurance companies. In case he fails to mention the same in the proposal form and
subsequently dies due to an accident, under which principle his claim could be questioned by
the Insurer, if facts of the other existing insurance policy become known to the insurance
company at the time of claim settlement.
a) Principle of Insurable Interest

b) Principle of Utmost Good Faith
c) Principle of Waiver and Estoppel
d) Principle of Indemnity
6. Mr. X wants to make a Will and understand its procedures; you explained that the is
the person responsible for offering the Will for probate.
a) Testator

b) Executor
c) Lawyer
d) Beneficiary
7 You have suggested a strategy which aims to invest more when the share price falls and less
when the share price rises. It is done by calculating predetermined amounts for the total value
of the investment in future periods and then making an investment to match these amounts at
each future period. You are indicating a technique known as .
a) Rupee Cost Averaging

b) Value Averaging
c) Economic Cost Averaging
d) Weighted Averaging
8. Mr. X wants to purchase a Child Plan from a Life Insurance company to meet Mr. X’s
educational needs. He wants to know, if he gets permanent physical disabled due to accident
which would hamper his income pursuits, by what means can the policy be kept in force
without payment of further premium but retaining intended benefits. You advise .
a) Payor Rider
b) Dreaded Disease Rider
c) Living Benefit Rider
d) Survivor Purchase Option Rider
9. You have explained Mr. X that while Underwriting the Insurer may counter the effects of
, insurers (to the extent that laws permit) ask a range of questions and may
request medical or other reports on individuals who apply to buy insurance, so that the price
quoted can be varied accordingly, and any unreasonably high or unpredictable risks rejected.
a) Moral Hazard
b) Morale Hazard
c) Adverse Selection

d) Uberrimaefidei
10. While preparing a Financial Plan for Mr. X you have made a forecast of his present revenues
and expenditures i.e. constructed a model of how his finances might perform in the near future.
You have prepared a .
a) Investment Plan
b) Fund Flow statement
c) Cash Flow statement
d) Budget
11. While explaining the basics of selecting a Mutual Fund scheme you have asked Mr. X to analyse
the Mutual Fund Portfolio by five main indicators that apply, one of these is which
is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole.
a) R-Squared
b) Alpha
c) Beta
d) Sharpe Ratio
12. Prior to providing any Financial Planning services, you a Financial Planning practitioner and Mr.
X, as your client shall mutually define the scope of the engagement. The letter of engagement
would define the scope of engagement by discussing
a) Identification of the service(s) to be provided

b) Financial Planning practitioner’s compensation arrangement(s)
c) Analysis and evaluation of client’s current situation
d) Determining the clients and the Financial Planning practitioner’s responsibilities;
e) Establishing the duration of the engagement;
f) Determine the strategies to achieve financial goals

i) , ii), iv) and v)
ii) , iii), iv) and vi)
i) , ii), iii), iv) and v)
i) , ii), v) and vi)
13. Before beginning work on Mr. X’s Financial Plan, you have drafted“Letter of Engagement” and
Sought Mr. X’s consent on the same. Mr. X asked you about relevance of such a letter. In the
context of Financial Planning Profession, you explain about the “Letter of Engagement” as a
.
a) Professional requirement under Code of Ethics of FPSB India

b) Professional requirement under Practice Guidelines of FPSB India
c) Legal contract as per Contract Act 1872
d) Document for his personal record
14. Mr. Gupta wants to know according to which Act his father’s estate would be distributed in
case he dies Intestate.
a) Hindu Succession Act, 1956, under which people belonging to Sikh, Hindu, Buddhist, Jain
religion are covered
b) Hindu Succession Act, 1956, under which people belonging to Sikh, Hindu, Parsi& Jain
religion are covered
c) Indian Succession Act, 1925, under which people belonging to Sikh, Hindu, Buddhist, Jain &
Parsi religion are covered
d) Indian Succession Act, 1925, under which people belonging to Sikh, Hindu, Jain, Parsi,
Christian & Jews religion are covered
15. Mr. X wants to know what is the best instrument to get market returns over a sufficiently long
period with the least recurring cost.
a) Diversified Equity Growth Mutual Fund Scheme.

b) Equity Index Funds.
c) Equity Shares.
d) Growth Option of ULIP.
16. Mr. X saw your name with CFP Marks; he wants to know different ways in which the CFP Marks
in India can be written.
I. CERTIFIED FINANCIAL PLANNERCM

II. CFPCM
III. CFPCM
IV. C.F.P.
V. CFPCM
VI. Certified Financial Planner CM
a) i) & ii)
b) ii), iii), vi)
c) iv), v) &vi)
d) ii), v) &vi)
17. Mr. X wants to invest in ULIP, but he wants to be cautious before entering a long period of
contract. As Per IRDA ULIP Guidelines, if he wants to return the policy within 15 days free look
period what amount would be refunded to him?
a) He shall be refunded the fund value subject to deduction of expenses towards medical
examination, stamp duty and proportionate risk premium for the period of cover.
b) Full Premium paid is returned back to him.
c) Premium paid less commission paid to intermediary is refunded to him.
d) He shall be refunded the fund value.
18. Mr. X wants to know how you will ensure that information and relevant documents given to or
gathered by you are securely stored? This would be is accordance to FPSB India's Rules that
relate to the Code of Ethics of .

a) Integrity
b) Diligence
c) Compliance
d) Professionalism
19. Before finalizing the Financial Plan, Mr. X tells you that she wants to entrust the estate issues to
a solicitor, who is a friend of Mr. X. Which of the following is your best stand?
a) Estate issues being substantial in the case, you maintain that the Financial Plan cannot be
an integrated one if the same is outside your purview, hence decline.
b) This is permissible subject to such an arrangement finding an explicit mention in the
Financial Plan for the said activity.
c) This is permissible subject to the advice of the solicitor being integrated into the Financial
Plan and monitored along with the Plan.
d) You agree to the arrangement subject to the advice of solicitor made known to you so that
you modify the Financial Plan accordingly.
20. While preparing Financial Plan for Mr. X you have ensured that all the significant
recommendations are made in writing. If any significant recommendations are given orally,
then confirmations have been given in writing. You have complied with Rule that relates to the
Code of Ethics of .
a) Fairness
b) Diligence
c) Professionalism
d) Compliance
21. You have advised Mr. X to buy a Term Insurance for his life , he wants to know the importance
of waiver of premium rider?
a) It is useless as there will not be any amount to be received from the Insurance Company at
the time of maturity of the policy

b) It is very useful as all future premiums would be waived by the Insurance Company in case
the Life Assured becomes totally and permanently disabled
c) It is same as Permanent Disablement rider hence need not be mentioned separately
d) It is inbuilt with all the Term Insurance plans and thus need not be mentioned separately
22. You have mentioned to Mr. X that as you increase the tenure of insurance coverage, the
premium charged per year will also increase. You are referring to which type of Life Insurance
coverage?
a) Whole Life Insurance Plan

b) Endowment Plan
c) Unit Linked Insurance Plan
d) Term Plan
23. The Financial Planning Practices represent the competencies that relate to the financial
planning professional’s ability to:
a) Understand and master the inter-relationships among the various Financial Planning
Components;
b) Integrate among the various Financial Planning Components to derive a financial plan; and
c) Apply the six-step financial planning process in performing the core Financial Planning
Functions.
d) All of the above
24. Mr. X wants to know the tax deduction on reinvestment of Interest on NSC. (3)
a) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 6
years
b) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 5
year
c) Accrued interest (which is deemed as reinvested) does not qualify for deduction.
d) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 3 year

25. What would be the correct sequence to perform six steps of Financial Planning process to
prepare a Financial Plan for Dr. X?
1. Developing and Presenting the Financial plan

2. Analyzing and evaluating the client’s financial status
3. Implementing the Financial Plan
4. Monitoring the Financial Plan
5. Establishing Client-Planner Relationships
6. Gather client data and determining Goals and Expectations (3)
a) 1, 3, 4, 5, 2, 6
b) 6, 2, 5, 4, 3, 1
c) 6, 5, 2, 1, 3, 4
d) 5, 6, 2, 1, 3, 4
26. In the initial stage of Financial Plan preparation, you told Dr. Mr. X and also mentioned in the
Financial Plan prepared that you would charge fixed fee for the Financial Plan construction and
you would also earn commission on sale of recommended financial products, if the same is
accepted. Which code of ethics binds the CFPCM Practitioner to disclose conflict of interests?
a) Objectivity
b) Fairness
c) Integrity
d) Professionalism
27. Mr. X wants to understand the basics to analyze the financial statement of a company, he
wants to know the ratios to look for in case he wants to know the profitability:
(a) Return on assets

(b) Return on equity
(c) Total assets turnover ratio
(d) Interest coverage ratio

a) (a) and (b)
b) (a), (c) and (d)
c) and (d)
d) only
28. Mr. X wants to know whether his Mutual Fund portfolio's returns are due to smart investment
decisions by the fund manager or a result of excess risk. As he is of the opinion that one
portfolio or fund can reap higher returns than its peers, it is only a good investment if those
higher returns do not come with too much additional risk. He wants his Mutual Fund to give
him better risk-adjusted performance. You would suggest him to look for Ratio.
a) Alpha
b) Sharpe
c) Beta
d) R-Squared
29. You have suggested Mr. X to look for few important risk measures which measure different
types of risks. When comparing two or more potential investments, an investor should always
compare such measures. These are .
a) CAPM, Treynor Ratio, Beta, Standard Deviation and the Sharpe Ratio
b) Alpha, Beta, R-squared, Standard Deviation and the Sharpe Ratio
c) Quick Ratio, Alpha, Beta, Sharpe Ratio and Retention Ratio
d) Debt/Equity Ratio, Current Ratio, Sharpe Ratio, Alpha and Standard Deviation
30. Mr. X has provided his assets and liabilities statement to you during the retirement planning
process. The financial statement will enable you to gain an understanding of all of the following
except the .
a) Diversification of the Mr. X's assets.

b) Mr. X's net cash flow.
c) Mr. X's liquidity position.

d) Mr. X's debt position.
31. Which of the following would not be violation of the “Principle of Integrity” in the performance
of your Professional service to Mr. X?
a) Exercising reasonable and prudent judgment in dealing with Mr. X.

b) Making misleading claims about the scope and areas of your competence.
c) Giving the impression that you are representing the views of FPSB India.
d) Engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.
32. You as a CERTIFIED FINANCIAL PLANNERCM Professional are required to exercise objectivity in
providing services to Mr. X, your client. This means you shall be .
a) Impartial
b) Honest
c) Competent
d) Diligent
33. Recently in an unfortunate event, one of Mr. X’s brothers died in a road accident. He was a
bachelor and he died intestate. Mr. X’s parents were living with his deceased brother. Apart
from Mr. X there are three other siblings of the deceased. Mr. X wants to know the applicable
order of priority as per Hindu Succession Act for the disposition of his deceased brother’s
property.
a) Both parents will get the priority over all siblings of Mr. X including Mr. X himself.
b) All siblings of Mr. X will get the priority over their parents.
c) Mr. X’s mother will get priority over
d) All of them will have equal right over the property of the deceased.
34. You have advised Mr. X to purchase householders Insurance Policy to insure his house as well
as contents of his house. Mr. X discusses with you about the features of Householders

Insurance Policy. As per you, which of the following is not a feature of Householders Insurance
policy?
a) Loss or damage by the insured’s domestic staff’s direct or indirect involvement in an

attempted burglary is covered.
b) He can make an endorsement to the policy during the currency of the policy to record
alteration related to change of Insurable interest by way of sale or mortgage.
c) Insured can cancel the policy during the currency of policy and get refund of premium paid
(after adjustment of administrative and other exp.) on pro-rata basis.
d) The Building is insured as per the re-instatement value and the contents are insured as per
the market value.
35. Mr. X wants to know, what would happen to the No Claim Bonus on his car insurance after he
sells his car.
a) He can enjoy the No Claim Bonus on the premium for his new car if he buys it within a
specified period from the date of sale of his old car
b) No Claim Bonus is lost after sale of old car
c) He can enjoy only 50% benefit of the No Claim Bonus on the premium for his new car if he
buys it within a specified period from the date of sale of his old car
d) He can avail benefit of No Claim Bonus on premium paid for Insurance taken for other
purposes from same Insurer
36. You have mentioned to Mr. X that you shall ensure all information and relevant documents
given to or gathered by you are securely stored to establish at any time that it has complied
with the FPSB India’s Professional Standards and be available for inspection by the FPSB India
when required. Such records shall be retained for seven years from the date the document was
last acted upon. This is according to the Code of Ethics of .
a) Compliance
b) Professionalism
c) Diligence

d) Objectivity
37. At the earliest point in the relationship, you have disclosed in writing to Mr. X that you are
authorized to sell or advise on a restricted range of products, and any other limitation of their
capacity to serve him. You have complied with the Code of Ethics of .
a) Compliance
b) Objectivity
c) Diligence
d) Competence
38. Mr. X wants partition in Mr. X’s HUF, to claim her share and Mr. X’s share out of the HUF’s
assets. In principle, Mr. X wants to know whether Mr. X can legally demand partition of Mr. X’s
HUF as she is also one of the members in the same.
a) Yes, as Mr. X has no objection

b) No
c) Yes, With prior permission from IT Department only
d) Yes, after the death of Mr. X
39. A Mutual Fund agent has told Mr. X that bigger the AUM of the fund the better it is. Which of
the following statements are correct?
1. The bigger the fund’s AUM, the lower the expense ratios and in that sense it could be
better.
2. The bigger the fund’s AUM, less are the chances of showing break-out returns as stock
buying becomes difficult without moving the price upwards.
3. The bigger the fund’s AUM the worse-off a mid & small cap fund would be, due to its
limited pool of stocks.
4. The smaller the AUM of a small cap fund the better it is due to lower expenses & higher
returns.
a) Only 1 is correct

b) Only 1 & 2 are correct
c) Only 1, 2 & 3 are correct
d) Only 2, 3 & 4 are correct
40. What is the correct sequence to perform six steps of Financial Planning Process to prepare a
financial plan for the client?

5. Gather client data and determining Goals and Expectations
6. Establishing Client – Planner Relationships
a) 1, 3, 4, 5, 2, 6
b) 6, 2, 5, 4, 3, 1
c) 6, 5, 2, 1, 3, 4
d) 5, 6, 2, 1, 3, 4
41. Mr. X has received few gifts in the financial year 2020-21 and he wants to know about the
taxation of the same. He received a gift of ₹ 63,000 from a friend and another gift of ₹ 24,000
from his neighbor. He wants to know, what is the total taxable amount from the above receipts
on which Mr. X will have to pay tax.
a) ₹ 63,000, as any amount received in excess of ₹ 50,000 is taxable.

b) ₹ 13,000, as the amount received over the limit of ₹ 50,000 is taxable.
c) ₹ 37,000, as the total amount in excess of the limit ₹ 50,000 is taxable.
d) The whole amount of ₹ 87,000, as the aggregate value of gifts received from one person or
more than one person exceeds ₹ 50,000.
42. Mr. X before approaching you has also contacted another CFPCM Practitioner for the
preparation of his Financial Plan. In his first meeting with the practitioner, Mr. X asked him the

sources of compensation available to the practitioner by making a Financial Plan for him other
than fee. But the practitioner refused to answer this question by saying that this is out of the
scope of engagement. According to FPSB India’s code of ethics, the practitioner has violated
Code of Ethic of .
a) Objectivity
b) Professionalism
c) Fairness
d) Integrity
43. Mr. X’s mother wants to stay with Mr. X on a permanent basis. Before that, she wants to settle
her estate. She has decided to give her Pune house to Mr. X. The current market value of this
house is ₹ 25 lakh. Since Mr. X is permanently settled in Ahmedabad and has no intention of
returning to Pune, he wants to dispose of the house at current market value. From tax planning
perspective, what would be the right course of action for Mr. X for transaction relating to this
house property?
a) Mr. X’s mother should sell this house first and then gift the sale proceed to him.
b) Mr. X’s mother should gift this house to Mr. X first and then he should sell the house.
c) Mr. X’s mother should make a Will Deed in favour of Mr. X first and then he should sell the
house.
d) Mr. X’s mother should gift this house in the name of Mr. X and Mr. X equally and then they
should sell the house.
44. You have ascertained that Mr. X needs a life insurance of at least ₹ 50 lakh on top priority. At
his age, a term insurance plan for a 10-year term is available for annual premium of ₹ 10,000
and for a term of 15 years the same is available for an annual premium of ₹ 12,000. He is,
however, concerned of getting ‘nil’ survival benefits in case of term insurance policies, though
he can currently ill afford a high premium for endowment or ‘with profit’ type of policies. A
‘return of premium’ term policy for a term of 10 years for ₹ 20 Lakh sum assured would

annually cost ₹ 18,000 for his profile. He wants to know which among the following would be
the most appropriate policy for him in the current circumstances.
a) He should take the term plan for 15 years, which will take care of his liabilities during this
period in case he dies prematurely.
b) He should take the term plan for 10 years only as the premium outflow here is the least.
c) He should take the ‘return of premium’ policy which would yield ₹ 2 Lakh to provide for his
liabilities when he is around 55 years of age.
d) He should take 10-year term policy along with a 10-year ‘return of premium’ policy to the
extent of ₹ 10 lakh to optimize on premium payment while getting survival benefits.
45. Which of the following shall you avoid while providing Financial Planning services to Mr. X and
Mrs. X in line with the Ethical and Professional Conduct of CFP CM Certificant entailed by FPSB
India?
a) Keep the client informed of developments in the field of Financial Planning.

b) Advice the client in those areas in which you have competence.
c) Seek council of qualified individuals for areas in which you lack adequate competence.
d) Alter existing financial strategy promptly, even without confirming to client, if the change in
circumstances materially impacts the client’s financial goals.
46. Mr. X had earlier approached a CERTIFIED FINANCIAL PLANNERCM who suggested investment in
certain financial products rather than earning minimal returns in a Savings bank account. The
Financial Planner recommended such investments as he would earn commission on sale of such
products. Which Code of Ethics binds a CFPCM practitioner to disclose conflict of interests?
a) Objectivity
b) Professionalism
c) Integrity
d) Fairness

47. Mr. X’s father had suffered loss from house property and loss from business and profession for
the previous year and has delayed in filing his return of income before the due date. Will her
father be eligible to carry forward losses at the time of filing his belated return of income?
(Assuming he does not have any corresponding income to set off of losses)
a) Yes, can he carry forward both

b) No, cannot carry forward both
c) Can carry forward only loss from house property
d) Can carry forward only loss from business and profession
48. Mr. X wants to know which types of insurance she should buy, considering the assets, liabilities
and her future goals. In the order of importance, which insurance should she ideally purchase?
1. Life Insurance
2. Health Insurance
3. Disability Insurance
4. Property Insurance
a) 3, 1, 2, 4
b) 1, 3, 2, 4
c) 4, 3, 1, 2
d) 3, 2, 1, 4
49. Mr. X wants to buy her residential house today at a hill station as she has received a fabulous
offer for a home loan. According to you, which types of insurance she should buy to cover that
risk.
a) Life Insurance and disability Insurance

b) Disability Insurance and Accidental Insurance
c) Householder’s Policy and Home loan Protection plan
d) Health Insurance and Life Insurance

50. Mr. X wants to invest in a new ULIP, but he wants to be cautious before entering a long period
of contract. As Per IRDA (ULIP) Guidelines, if he wants to return the policy within 15 days free
look period what amount would be refunded to him?
a) He shall be refunded the fund value subject to deduction of expenses towards medical
examination, stamp duty and proportionate risk premium for the period of cover.
b) Full Premium paid is returned back to him.
c) Premium paid less commission paid to intermediary is refunded to him.
d) He shall be refunded the fund value.
51. While entering into a relationship with you, Mr. X assumed that you being a CERTIFIED
FINANCIAL PLANNERCM practitioner, you are fully able to take care of the execution of all
aspects of his Financial Plan, i.e. Taxation, Insurance, Investments, etc. As per FPSB India Code
of Ethics, what is the best proposition in this context?
a) This is the right assumption which can be made about all CERTIFIED FINANCIAL PLANNERCM
professionals.
b) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNER CM
practitioner needs to be disclosed in the beginning, specifically in writing, by the
professional to the client.
c) A CERTIFIED FINANCIAL PLANNERCM practitioner can never take care of all aspects of a
Financial Plan.
d) A CERTIFIED FINANCIAL PLANNERCM practitioner is concerned with only making a Financial
Plan and not its execution.
52. Mr. X has informed you that his Post Office MIS account is maturing next month. He wants to
know whether this account can be extended further and, if so, for what duration?
a) Cannot be extended.
b) Can be extended for 24 months.
c) Can be extended for 60 months.
d) Can be extended for 72 months.

53. Mr. X wants to create a private trust in the name of her children. According to you, which of the
following are true in case of a private trust
I. A trustee shall be any known person capable of holding property

II. A trust has to be declared by a non – testamentary instrument in writing , signed and
registered or by the will of the author of the trust or of the trustee in case of an immovable
property
III. A trustee would be taxed in his hands in a representative capacity where the beneficiary is
a minor, lunatic or idiot or specifically entitled to receive the income from the trust
IV. The author of the trust can be the trustee himself
a) (III) and (IV)
b) (II) and (III)
c) (II), (III) and (IV)
d) (I), (II) and (IV)
54. Before beginning work on Mr. X’s Financial Plan, you have drafted a “Letter of Engagement”
and sought Mr. X’s consent on the same. Mr. X asked you about relevance of such a letter. In
the context of Financial Planning profession, you explain about the “Letter of Engagement” as a
.
a) Professional requirement under Code of Ethics of FPSB India

b) Professional requirement under Practice Guidelines of FPSB India
c) Necessary legal requirement as per Contract Act 1872
d) Document for his personal record
55. Mr. X, who is a Hindu, wants to know according to which Act his father’s estate would be
distributed in case he dies Intestate.
a) Hindu Succession Act, 1956

b) Indian Contract Act
c) Indian Succession Act, 1925

d) Transfer of Property Act
56. Financial Planning is a ----------- term than mere investment advice / recommendations and
subsequent placement of funds.
a) Broader
b) Comprehensive
c) Better
d) Best
57. Mr. X wants to know what the most appropriate instrument is/are to replicate exactly the
equity market returns over a sufficiently long period with the least cost and risks.
I. Diversified Growth schemes of Mutual Funds

II. Equity Index Funds
III. Growth Option of ULIPs
IV. Exchange Traded Funds of Equity Indices
V. A portfolio of Large Capitalized stocks
a) (i) and (ii)
b) (ii) and (iv)
c) (i) and (iii)
d) (iv) and (v)
58. Mr. X saw the acronym CFPCM against your name in your business card. He wants to know
about the same. You tell him that .
a) CFP marks are owned outside the US by US based FPSB Ltd

b) FPSB India is the owner of CFP marks within Indian territory
c) The US based FPSB Ltd. is licensed globally to administer CFP marks
d) The US based FPSB Ltd. and FPSB India are respectively licensed to issue CFP certification in
US and India

59. The planner helps clients to:
a) Make informed decisions about their money and how it can be used to best advantage;
b) Develop a sound financial plan covering all aspects of their financial well- being (from
wealth creation to wealth protection);
c) Choose products that meet their specific needs; and
d) Review their financial situation on a regular basis and revise their financial plans as
necessary.
e) All of the above
60. Which of the following shall you avoid while providing Financial Planning services to Mr. X in
line with the Ethical and Professional Conduct required of CFP CM professionals by FPSB?
a) Alter existing financial strategy promptly in the interest of Mr. X, even without confirming to
her, if the adverse developments materially impact her financial goals.
b) Keep Mr. X fully informed of adverse developments affecting her financial goals and take
remedial action only after her understanding of the situation and her concurrence.
c) Advise Mr. X of the developments affecting her financial goals only when she comes for
review of Financial Plan after the pre-determined period.
d) Revise asset allocation as often as possible to ensure that the financial goals are achieved
exactly as set out initially.
61. As per the practice guidelines of FPSB India followed by you, being a CERTIFIED FINANCIAL
PLANNERCM practitioner, which amongst the following is the next step after defining and
discussing with Mr. X the basic terms of the financial plan construction?
a) To collect the quantitative and qualitative information of the prospective client

b) To inform the prospective client about the terms of the engagement
c) To define the financial goal of Mr. X
d) To share past financial records of your existing clients with your prospective client in order
to make him comfortable with number and success of your clientele funds

62. Shweta has not bought personal accident insurance cover, though her car is covered for
damages from accident. She wears seat belt and drives carefully. You, as a CFPCM professional,
had your following observation about her risk management?
a) She has insured the property risk; she controls some of her personal risk and retains the
rest of the risk.
b) She has transferred her personal risk to other drivers of the road, insured her property risk
and can claim damage if accidents are caused by third party negligence.
c) She has controlled her personal risk and insured her property risk.She has not done
anything to manage her risks and has to immediately go for accident and personal risk
cover. She cannot rely on third party damages alone to cover the risk of the road.
63. Sunita wants to know, which are the documents her claimant (nominee/legal heir) must send to
insurance company to claim the policy benefits in case of a life insurance policy?
I. An intimation of the death of the life assured to the insurance company

II. Death certificate from local authorities
III. Completed claim forms and other forms as required by the company
IV. Valid Policy of Life assurance
V. Authentic Identification that the person claiming is entitled to receive the payment
a) (i), (ii), (iii), (iv) & (v)
b) (ii), (iii) & (iv)
c) (i), (iii) & (iv)
d) (ii), (iii), (iv) & (v)
64. Sunita wants to know if she were to meet with an accident and get permanent disability in the
third year of her Term Insurance policy, what amount of the premium due in the fourth year
would be payable by her. The premium being paid towards the policy is ₹ 15,000 with sum
assured of ₹ 50 Lakh.
a) ₹ 15,000
b) ₹ 12,000

c) ₹ 7,500
d) Nil
65. You have advised Snigdha to do Estate Planning. According to you what should be the most
preferred way for her Estate Planning?
a) She should prepare a Will naming her children as the sole beneficiaries as well as
designate one or more guardians with their prior consent.
b) She should devolve all of her personal properties to her personal HUF.
c) She should prepare a Will naming her children as the sole beneficiaries in the same.
d) She should transfer all of her existing properties in the names of her children and nominate
her both children equally in all her legal documents.
66. In the initial stage of Financial Plan preparation, you told Mr. X and also mentioned in the
Engagement Letter that you would charge fixed fee for the Financial Plan construction and you
would also earn commission on sale of recommended financial products, if the same is
a) Objectivity
b) Fairness
c) Integrity
d) Professionalism
67. Mr. X wants to buy a life insurance policy on the life of his father as well as both his brothers.
However, in case of any eventuality he wants to reserve all legal rights of receiving the policy
benefits in his name. He wants to know whether it is legally possible for him.
a) Yes, he can buy the policy in the desired way.

b) Yes, but he cannot reserve the right to receive the policy benefits.
c) No, in the absence of insurable interest he cannot buy life insurance policy in their name.
d) He can buy the policy only in the name of his father in the desired way

68. Mr. X’s father has made a Will deed for distribution of his assets. Mr. X discusses with you
regarding Probate process, as per you which is not a feature of Probate process?
a) The assets are gathered, applied to pay debts, taxes and expenses of administration and
distribute to those designated as beneficiaries in the Will.
b) Executor or Personal Representative named in the Will is in charge of this process.
c) All legal heirs will receive notices from the court to file objections.
d) The court will give orders to distribute the assets to the heirs as per intestate succession
Act.
69. You have disclosed in writing to Mr. X on your ability to advise and sell on a restricted range of
products, and some other limitation of their capacity to serve him. You have complied with the
Code of Ethics of .
a) Integrity
b) Objectivity
c) Fairness
d) Diligence
70. You have already mentioned to Mr. X that you shall confirm in writing to him where a
subsequent instruction given by him significantly alters the financial strategy or balance of an
existing portfolio under your supervision. You have complied with the Code of Ethics of
.
a) Diligence
b) Compliance
c) Confidentiality
d) Objectivity
71. Mr. X wants to know, what are the factors that are included in the calculation of life insurance
premium rate?
1. Rate of Mortality

2. Investment earnings
3. Expenses
4. Economic condition of the country
5. Political stability
a) 1, 2, 3, and 4
b) 1, 2 and 3
c) 1 and 2
d) 1, 2, 3, 4 and 5
72.------------------------------------ establishes realistic expectations for both the client and the financial
planning professional. It can be comprehensive or limited advice.
a) Mutually defining the scope of the engagement

b) Mutually compromising on various aspects of plan
c) Mutually discuss the compensation arrangements
73. You have selected a Mutual Fund scheme which has stocks in its portfolio which move together
and have a high correlation.
a) The Mutual Fund portfolio will have a return that is lower than the stocks included in it, but
have a risk that is higher than the risk of the stocks.
b) The Mutual Fund portfolio will have a return that is the average of the stocks included in it,
but have a risk that is lower than the risk of the stocks.
c) The Mutual Fund portfolio will have a return that is the average of the stocks included in it,
but have a risk that is higher than the risk of the stocks.
d) The Mutual Fund portfolio will have a return and risk, which lies in the range of risk and
return of the stocks included in it.
74. The estimated value of a real estate asset in a financial statement of Mr. X, prepared by you
would be based upon the:
a) Basis of the asset, after taking into account all straight line and accelerated depreciation.

b) Mr. X's estimate of current value.
c) Current replacement value of the asset.
d) Value that a well-informed buyer is willing to accept from a well-informed seller where
neither is compelled to buy or sell
75. Mr. X has asked you to give him a written assurance that if you prepare a Financial Plan for him,
then in no case you would reveal any of his information to any other person, including his
family members as per FPSB Code of Ethics, is it possible for you?
a) Yes
b) No
c) Yes, but with prior consent of all relevant family members
d) No, because client has no authority to demand such type of assurance.
76. Mr. X wants to know what maximum amount can be claimed with respect to each covered
family member in the proposed health insurance policy (Family Floater) of Virendra’s family.
a) Each family member can claim up to one third amount of total sum assured.
b) Both the parents can claim up to 40% each of the sum assured while the child can claim 20%
of the sum assured.
c) No limit is defined for individual family member subject to overall sum assured.
d) None of the above
77. Mr. X is seriously concerned with the ongoing rising inflation. Taking a bitter experience of his
earlier equity investments, he is keen to do some investments in debt instruments. Keeping in
view the constantly rising inflation rate into account, which type of investment, from the given
options, is advisable for Mr. X in the current scenario?
a) Bank FDR
b) Long Term Bonds
c) Short Term Bonds
d) Floating Rate Bonds

78. Mr. X informed you that prior to consultations with you, he had contacted another CFPCM
practitioner who demanded a flat remuneration of 35% of the “Assets under Management”
from Mr. X for providing his services. Is there any violation of “Code of Ethics” as stipulated by
FPSB India by the earlier Practioner?
a) This is a matter of mutual consent between the practitioner and the client only.
b) This is a violation of Code of Ethics of Professionalism.
c) This is a violation of Code of Ethics of Fairness.
d) This is a violation of Code of Ethics of Compliance.
79. Mr. X’s parents are senior citizens. They have no other source of income other than what they
get from Mr. X per month. Mr. X wants to ensure a separate source of cash inflow for them
thereby ending their dependency upon him. For this purpose he wants to deposit ₹ 5 lakh each
in the name of both of his parents in Senior Citizen Saving Scheme, 2004. However before doing
so he wants to know from you whether the same is allowed.
a) No, any deposit in the said scheme should be made only from the retirement benefits of the
concerned depositor.
b) Yes, after the age of 60 years of depositor, source of deposit is immaterial.
c) No, any deposit in the said scheme should be sourced from self-funds only.
d) Yes, any person not having any source of income can make a deposit in the said scheme.
80. Mr. X wants to buy a life insurance policy on the life of his father as well as both his brother
However, in case of any eventuality he wants to reserve all legal rights of receiving the policy
benefits in his name. He wants to know whether it is legally possible for him.
a) Yes, he can buy the policy in the desired way.

b) Yes, but he cannot reserve the right to receive the policy benefits.
c) No, in the absence of insurable interest he cannot buy life insurance policy in their name.
d) He can buy the policy only in the name of his father in the desired way.

81. Mr. X’s father-in-law is a well-established businessman and Mr. X’s wife is his only child. He
wants to include Mr. X as a member in their HUF. Is it possible?
a) Yes
b) No
c) Yes, but with prior permission from IT department
d) Yes, but first Mr. X’s father-in-law should prepare a non-revocable Will in favour of Mr. X
82. What is the status of nominee in financial assets of his Mrs. X as she has died intestate?
a) Nomination shows that Mr. X will get the full custody and the sole ownership as well of the
financial assets.
b) Nominee has only the right to receive the proceeds of financial assets; the distribution of
such assets to legal heirs may take place later as per Succession law.
c) Nominee’s role in nomination is equivalent to the role of executor applied in case of Will.
d) Nomination gives right of share of ownership even to person who has no blood relation
with deceased.
83. Mrs. X held her portfolio for 10 years. How will you compute her return over the period in
annual terms?
a) The holding period return is computed by comparing the total appreciation in the portfolio
and the dividends received, with the original amount invested. The number can then be
annualized.
b) The CAGR of the portfolio, including the dividends received, represents the return on the
investment.
c) The holding period return will be equal to the dividend yield over the holding period.
d) Annual return for every year has to be first computed. This has to then be averaged to know
the returns over the 10 year period.

84. An analyst has advised Mr. X after considering him to be risk averse, to invest in a portfolio to
optimize or maximize expected return based on a given level of market risk, emphasizing that
risk is an inherent part of higher reward. He was referring to .
a) Sharpe Ratio
b) Post-Modern Portfolio Theory
c) Jensen’s Ratio
d) Modern Portfolio Theory
85. You tell Mr. X that the primary objective of Financial Planning is to manage one’s cash flows
optimally to achieve one’s financial goals. Which one of the following best describes the
management of liquidity? It is to manage cash in order to .
a) minimise the cash balances to optimise interest earnings

b) arrive at optimal cash balance based on a well-drawn budget
c) maintain enough cash to meet all liquidity requirements
d) strike a balance between liquidity needs and interest foregone on cash balances
86. You have asked Mr. X to prepare an estimation of the revenue and expenses over a specified
future period of time. You are referring him to prepare a/an .
a) Income and Expenditure Statement

b) Balance Sheet
c) Budget
d) Cash Flow statement
87. You have mentioned to Mr. X that you shall ensure all information and relevant documents
given to or gathered by you are securely stored to establish at any time that it has complied
with the FPSB’s Professional Standards and be available for inspection by the FPSB when
required. Such records shall be retained for seven years from the date the document was last
acted upon. This is according to the Code of Ethics of .
a) Compliance

b) Professionalism
c) Diligence
d) Objectivity
88. At the earliest point in the relationship, you have disclosed in writing to Mr. X that you are
authorized to sell or advise on a restricted range of products, and any other limitation of their
capacity to serve him. You have complied with the Code of Ethics of .
a) Compliance
b) Objectivity
c) Diligence
d) Competence
89. What is the correct sequence to perform six steps of Financial Planning Process to prepare a
financial plan for the client?

5. Gather client data and determining Goals and Expectations
6. Establishing Client – Planner Relationships
a) 1, 3, 4, 5, 2, 6
b) 6, 2, 5, 4, 3, 1
c) 6, 5, 2, 1, 3, 4
d) 5, 6, 2, 1, 3, 4

90. Which of the following shall you avoid while providing Financial Planning services to Mr. X and
Mr. X in line with the Ethical and Professional Conduct of CFPCM Certificant entailed by FPSB
India?
a) Keep the client informed of developments in the field of Financial Planning.

b) Advice the client in those areas in which you have competence.
c) Seek council of qualified individuals for areas in which you lack adequate competence.
d) Alter existing financial strategy promptly, even without confirming to client, if the change in
circumstances materially impacts the client’s financial goals.
91. Mr. X wants to make some investment in the name of her mother so that she receives a regular
monthly income to meet her regular expenses. He approaches you to know which of the
following asset allocations you would recommend for her who will be dependent on her
investments for monthly income later on.
a) Fixed Deposits: 60% Post office MIS: 30% Equities: 10%

b) Fixed Deposits: 40% Post office MIS: 30% Equities: 30%
c) Fixed Deposits: 20% Post office MIS: 40% Equities: 40%
d) Fixed Deposits: 10% Post office MIS: 40% Equities: 50%
92. You, as a CFPCM Certificant, need to disclose regarding compensation to be received from Mr.
X.
a) According to you, which would be the most appropriate option?

b) Need not disclose the source of compensation
c) Need to disclose compensation structure at the time of establishing relationship
d) Need to disclose only when asked by Mr. X
e) Need to disclose the source once the financial plan is constructed

93. You have disclosed in writing to Mr. X that you are only authorized to sell or advise on a
restricted range of products, and other limitation of your capacity to serve him, this is according
to the Rules that relate to the Code of Ethic of .
a) Objectivity
b) Competence
c) Fairness
d) Integrity
94. During the financial discussions with Mr. X, you asked him about his income. But Mr. X was bit
of hesitant in telling his income details to you. Mr. X wants to know the relevance of income in
analyzing his insurance requirement. You explained him that his income would be used to
determine:
I. The amount of income protection cover required

II. The amount of premium loading and/or any exclusion applicable to the policy
III. What level of income would be required for dependants in the event of premature death?
IV. What level of income would be required in the event of disability?
a) I and II
b) II and IV
c) I, III and IV
d) I, II and IV
95. You as a CFPCM Certificant have made it clear to Mr. X that you shall enter into an engagement
with him as a client only after securing sufficient information to be satisfied that:
The relationship is warranted by Mr. X’s needs and objectives; and
You have the ability to either provide requisite competent services or to involve other
professionals who can provide such services. You have followed the Code of Ethic of
.

a) Diligence
b) Professionalism
c) Compliance
d) Fairness
96. During the recent period you feel that the stock market has shown a strong bullish run. The
Super Industry Ltd’s Shares, which Mr. X bought for ₹ 900 per share about nine months back,
are now at ₹ 1,760 per share. He does not want to sell his shares since he is bullish in the long
term. He wants to protect the appreciation on the stock price from the downside which market
may face in the short term. He approaches you to guide him what strategy he should use. CALL
Option of ₹ 1,740 is available @₹60, PUT Option of 1740 is available @ ₹ 50.
a) Buy PUT option

b) Sell PUT Option
c) Buy CALL Option
d) Sell CALL Option
97. Mr. X has come to know about this CFPCM practitioner through a newspaper advertisement.
The theme and wording of advertisement says that along with preparation of Financial Plan,
they also help to generate assured return of 12% p.a. According to FPSB India’s code of ethics,
the practitioner has violated .
a) Code of Ethic of Objectivity

b) Code of Ethic of Professionalism
c) Code of Ethic of Fairness
e) Code of Ethic of Integrity
98. Before finalizing the Financial Plan, Mr. X tells you that he wants to entrust the estate issues to
a solicitor friend, Mr. Z. Which of the following is your best stand?
a) This is not permissible as per the Rules of FPSB India

Financial Plan for the said activity
Plan and monitored along with the Plan
d) You may enter into an MoU with the Solicitor and may also have a revenue sharing model
99. Being pessimistic due to the present recessionary market, Mrs. X is thinking to surrender her
ULIP after 4 years subscription only. She wants to know from Income Tax planning perspective
whether it would be advisable for her to surrender this insurance policy at present as she keeps
on claiming deduction u/s 80C against this policy’s investment?
a) She should hold this policy for at least one more year
b) She can surrender this policy any time after three years from the date of buying the policy
c) She should hold this policy for at least six more years
d) She should hold this policy for the full term
100. Mrs. X wants to adopt a child and part with some of her properties in favour of the child. She
wants to plan her Estate as she will remain a spinster throughout her life. But she is afraid that
after her death her brother may challenge such transfer. You would advise her .
a) not to do any Estate Planning

b) to prepare a WILL
c) to create a Registered Living Trust where the child would be the beneficiary
d) to prepare a Power of Attorney in favour of her father to manage her property for the
benefit of the Child
101. A Life Insurance Agent has approached you with two types of Term Insurance Plans:
I. Plan I, without return of premium, term 25 years, Sum Assured of ₹ 25 lakh, yearly premium
payable ₹ 1.94 per thousand of SA
II. Plan II, with return of total premiums paid, on maturity, term 25 years, Sum Assured of ₹ 25
lakh, yearly premium payable ₹ 2.95 per thousand of SA.

III. You are not clear which plan to opt for and you seek Financial Planner’s advice on which
policy is beneficial for you, if discounted by the risk free rate. (Assuming you live till
maturity of the Insurance Policy)
a) Plan I is better as the net present value is higher
b) Plan I is better as the net present value is lower
c) Plan II is better as the net present value is higher
d) Plan II is better as the net present value is lower
102. Shweta wants to know if she dies before the vesting date of the Unit Linked Pension Plan how
will it be taxed in the hands of the nominee for the amount received as per currently prevailing
provisions of the Income Tax Act, assume the allocation is 100% into equity.
a) Fully Taxable
b) Fully Exempt
c) Subject to long term capital gain of 10% without indexation benefit
d) One third would be tax free
103. Mr. X’s father has taken a loan under reverse mortgage scheme against his house in Gurgaon
which is valued today at ₹ 20 lakh. Mr. X is curious to know, if the loan amount being received
by his father will be treated as income and whether the alienation of property for recovery of
loan attracts capital gains?
a) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in
his hands and for the purpose of alienation of property for recovery of loan shall attract
capital gain.
b) The amount received by Mr. X’s father shall not be treated as his income and shall be
exempt from tax and for the purpose of alienation of property for recovery of loan shall not
attract capital gain.
c) The amount received by Mr. X’s father shall not be treated as his income hence shall not be
taxed, for the purpose of alienation of property for recovery of loan shall attract capital
gain.

d) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in
his hands and for the purpose of alienation of property for recovery of loan shall attract
capital gain but only in case of death of the mortgagor.
104. Mr. X read a draft offer document that PFRDA has come out with a New Pension Scheme (NPS)
for all citizens of India. He is also thinking to invest in NPS but he is confused with regards to the
withdrawal provisions of the scheme in Tier-I. You are required to provide him with the correct
details of the withdrawal.
I. If he exits before 60 years of age, he will have to invest at least 20% of the pension wealth
to purchase a life annuity and the rest 80% of pension wealth may be withdrawn as a lump
sum.
II. If he exits on attaining 60 years of age, he will have to invest at least 40% of the pension
wealth to purchase a life annuity and the rest 60% of pension wealth may be withdrawn as
a lump sum or in a phased manner between ages 60 and 70 years
III. If he exits before 60 years, he will have to invest at least 80% of the pension wealth to
purchase a life annuity and the rest 20% of pension wealth may be withdrawn as a lump
sum.
IV. If he exits on attaining 60 years of age, he will have to invest at least 60% of the pension
wealth to purchase a life annuity and the rest 40% of pension wealth may be withdrawn as
a lump sum or in phased manner between ages 60 and 70 year
a) i & iv
b) i & ii
c) ii & iii
d) iii & iv
105. Mr. X, in a business conference met a CFPCM Practitioner who was one of his old friends. Both
of them were discussing about their professions and businesses and during the talks Mr. X
asked for some recommendation on his personal finances from his CFPCM friend. He suggested
Mr. X to come to his office and he will provide the recommendations in writing. Mr. X asked, is

it important to have it in writing? You as a CFPCM Practitioner explained that all
recommendations concerning the financial affairs of a client should be presented in writing
because:
1. It is regarded as best practice under the FPSB India code of ethics and rules of professional
conduct.
2. It provides substantial protection to the planner under common laws against any claims
arising thereof.
3. It will not attract the law of contract to determine the civil rights of both the parties.
4. It gives the client the necessary time to fully consider the planner’s recommendations.
a) 1, 2 and 4 only
b) 2, 3 and 4 only
c) 1 and 4 only
d) 1, 2, and 3 only
106. Mr. X is planning to create a specific trust under a will and start the new business under the
name of the trust. He plans to have Neha as 100% specific beneficiary of the trust for her
support and maintenance. He approached you a CERTIFIED FINANCIAL PLANNERCM to take
advice on creation of trust. You as a CFPCM Practitioner are required to provide him with the
provisions relating to taxation of the income of the trust if the said trust is the only trust
created by Mr. X in the benefit of Neha.
a) The specific trust will be assessable at a flat rate of 20% plus cess plus surcharge if the
income of the trust exceeds ₹ 10 lakh.
b) The specific trust will be assessable at the maximum marginal rate of income tax u/s
161(1A) of the Income Tax Act.
c) The specific trust will be assessable at the slab rates of income applicable to the total
income of an individual and will be covered under the exception clause u/s 161(1A).
d) The specific trust under Indian Trust Act cannot override the provisions of the Income Tax
Act and Mr. X will be assessed under the head of Business and profession as per provisions
applicable to an individual.

107. Ms. X has told you that before divorce Mr. X had bought a single premium life insurance policy
on his own life and expressed on the face of it to be for the benefit of his wife and children as
per Section 6 of Married Women's Property Act, 1874. Now, Mr. X wants to change the
beneficiary of the said policy. Mr. X asks you whether it is possible.
a) Yes, by making an amendment in the trust deed.

b) No, alteration is not permitted.
c) Yes, but with written consent of Mrs. X only.
d) Yes, but only by writing a registered Will.
108. Ms. X wants to know how the amount of ₹ 20,000 invested by cheque in her PPF account by Mr.
X from his own income in May 2018 would be treated while computing her Income Tax liability.
a) ₹ 20,000 now and interest thereon will be tax free in her hands; she would not get benefit
of ₹ 20,000 u/s 80C.
b) ₹ 20,000 now and interest thereon will be tax free in her hands and she would also get
benefit of ₹ 20,000 u/s 80C.
c) ₹ 20,000 and the interest thereon would be tax free in her hands and she would get
benefits u/s 80C only if she reimburses ₹ 20,000 to Mr. X on maturity.
d) ₹ 20,000 will be taxable in her hands now, but the same amount along with the
accumulated interest thereon will be tax free in her hands and she would get benefit of ₹
20,000 u/s 80C.
109. You have advised Ms. X to buy a Householders Insurance policy. She wants to know how the
value of house and its contents are assessed by the insurance company.
a) The value of House and that of various belongings in the house are assessed as per their
individual market value.
b) House's value is assessed as per its re-instatement value and the value of the various
belongings in the house is assessed as per their individual market value.

c) The value of House and that of various belongings in the house are assessed as per their
reinstatement value.
d) The value of House is assessed as per its market value and the value of the various
belongings in the house is assessed as per their individual re-instatement value.
110. You have advised Ms. X to buy a Householders Insurance policy, she wants to know whether
burglary by domestic staff is also covered.
a) It would be covered under the burglary option of Householders Insurance policy.

b) If any domestic staff, whether currently employed or engaged in the past, is involved in
burglary at the house, the insurance company is not liable to pay for any losses or damages.
c) If any present domestic staff is directly involved in burglary at the house, the insurance
company is not liable to pay for any losses or damages.
d) If any domestic staff is involved in burglary at the house, the insurance company is liable to
pay for any losses or damages if proved that it has been deliberate and violent.
111. While preparing Ms. X's Financial Plan, in all your oral or written recommendations, you have
taken reasonable steps to place Ms. X in a position to comprehend the recommendations and
the basis thereof. You have also taken due care to explain the nature of the investment risks
involved in terms she is likely to understand. You have complied with the Rules that relate to
the Code of Ethic of .
a) Professionalism
b) Diligence
c) Fairness
d) Competence
112. Mr. X’s friend Dinesh used to take advice on his investments from a Financial Planner certified
by FPSB who co-mingled the money of Dinesh with his own money. However, the Financial

Planner maintained good records to segregate both cash flows. Which of the following
Principles has hisFinancial Planner violated?
1. Integrity
2. Objectivity
3. Fairness
4. Professionalism
a) 1 only
b) 1, 2 and 4
c) 1,2 and 3
d) 1,2, 3 and 4
113. Mr. X renewed his car insurance which was due for renewal on 18th March, 2019 by sending
out a premium cheque on 14th March, 2019 to the insurer for ₹ 4,500 towards a sum assured
of ₹ 1 lakh. He received a cover note subject to realization of cheque. Mr. X’s car met with an
accident on 27th March, 2019. He enquired from the insurer about his insurance policy for the
car and was shocked to learn that the same was not renewed due to dishonour of his cheque.
He seeks your advice regarding admissibility of insurance claim on the basis of cover note
received. You advise that .
a) Mr. X is not entitled to the claim amount as the renewal premium cheque was not
honoured.
b) Mr. X is entitled to the claim as he got a cover note as a proof of his having renewed the
policy.
c) Mr. X is entitled to get full sum assured because the company didn’t inform him about the
cancellation of the contract because of dishonouring of his cheque.
d) Mr. X has to get approval from Insurance ombudsman for clearance of his claim from the
insurer.
114. Mr. X has many clients who repose faith in him for his skills, knowledge and ethical dealing. One
of his clients, Mrs.Y who is 70 years of age, has a will in which she leaves her entire estate to

her two children, who live separately and never take care of her in any way whatsoever. Mr. X
helped her a lot in her medical care during her last days. Before she died, Mrs. Y had changed
her will to add a ₹10 lakh gift to Mr. X. She hired a different attorney to add the codicil to the
will. Upon Mrs.Y’s death her children denied to give the gift to Mr. X stating it was invalid
because of undue influence. In the light of the facts cited above which of the following
statements is correct?
a) The gift to Mr. X is invalid because he used undue influence to induce Mrs.Y to change her
will.
b) The gift to Mr. X is valid because there was no undue influence, a different attorney
added codicil, and her act of adding codicil was with her free consent.
c) The gift to Mr. X is invalid because he knew Mrs. Y was on her last days so he set the
circumstances and obtained the gift.
d) The gift to Mr. X is valid because the gift was with her consent though he took the
advantage of her loneliness and induced her make a favour.
115. Mr. X working in a Legal Firm as Legal Advisor is always under an apprehension that his profile
of giving legal advice to clients is full of risk. He plans to take Professional Indemnity Insurance
to minimize his professional risk but he is not sure that what is the scope of the policy? He has
approached you for your advice. You advise that the Professional Indemnity Insurance has the
following scope:
a) Any error and/or omission on his/her part committed whilst rendering professional service.
b) Any liability arising out of any criminal act or act committed in violation of any law or
ordinance is not covered.
c) Legal cost and expenses incurred in defence of the case.
d) All of the above.
116. You have identified some insurance needs for Mr.X and MrsX as follows:
I. Health Insurance

II. Accident & Disability Insurance
III. Home Insurance
IV. Travel Insurance
According to you what should be the order of priority for these insurance needs?
a) i), ii), iii), iv)

b) ii), i), iii), iv)
c) iii), ii), i), iv)
d) i), iii), ii), iv)
117. Right now Mr.X& Mrs. X both are getting House Rent Allowance included in their salary and
they are living in Mr. X’s apartment &Mr.X is claiming deductions u/s 24(b) and 80C on account
of housing loan EMIs. He wants to know the right proposition of taxation of his HRA. Mr.X shall
.
a) not get any exemption for HRA

b) not get any deduction u/s 24 (b)
c) not get any deduction u/s 80C
d) get the eligible exemption from HRA along with deduction u/s 24 (b) & 80C
CM
118. Mr. X has asked you a practicing CERTIFIED FINANCIAL PLANNER about the ownership of
CFPCM mark in the world. You have explained to him that .
a) CFPCM mark is owned by FPSB India

b) CFPCM mark is owned by FPSB across the world
c) CFPCM mark is owned by CFP Board across the world
d) CFPCM mark is owned by FPSB, Denver (US) outside the United States
119. Mr. X wants to invest in order to build up a corpus when he returns to India a decade later. In
consideration of different choices available to him, taxation is also one of the aspects which he

is considering in the proposed investment. He wants to have least operating costs and optimum
tax treatment of his investment kitty when he requires the same. As per the currently prevailing
tax provisions, what investment option is most suitable for Mr. X.
a) Equity option in any Unit Linked Pension Plans of a life insurance company
b) Equity option in any Unit Linked Insurance Policy
c) Equity Growth fund in any established Mutual Fund Scheme
d) All of the above
120. Mr. X wants to know if he makes some withdrawals from his PF account for arranging funds for
Mr. X. How will the interest be calculated on the amount of money withdrawn?
a) Interest shall be credited from the beginning of the current year on the money
withdrawn, up to the last day of the month preceding the month of such withdrawal.
b) Interest shall be debited from the beginning of the current year on the money withdrawn,
up to the last day of the month preceding the month of the withdrawal.
c) Interest shall be debited from the beginning of the current year on the money withdrawn,
up to the last day of the month of the withdrawal.
d) Interest shall be credited from the beginning of the current year on the money withdrawn,
up to the last day of the month of the withdrawal.
121. As a CFP Certificant, which of the following will not be a correct interpretation of the Rules of
Conduct pertaining to the Code of Ethics of Diligence for you while dealing with Mr.X?
a) A significant recommendation may be given orally, however confirmation must be given in

writing as soon as possible.
b) As a CFP Certificant, you are considered to be more knowledgeable than Mr.X and hence
may not need to explain the recommendation and basis in a manner that Mr.X may
comprehend.

c) As a CFP Certificant, you shall enter into an engagement with Mr.X only after securing
sufficient information to be satisfied that Mr.X's needs and objectives warrant the
relationship.
d) As a CFP Certificant, you shall confirm in writing to Mr.X where a subsequent instruction
given by him alters the financial strategy of his portfolio under your supervision.
122. Mr.X wants to know whether he is eligible to withdraw from his Employees’ Provident Fund for
purchase of his new house.
a) Yes, as he has been a member of the fund for more than 3 year
b) No, as he has not been a member of the fund for more than 10 year
c) Yes, as he has been a member of the fund for more than 5 years, and provided he
purchases the house in his own name or in his own name and in his wife’s name.
d) Yes, as he has been a member of the fund for more than 5 years, and provided he purchases
the house in his own name or in his wife’s name.
123. Mr.X plans to take a loan from a bank for purchasing a house in Ahmadabad. He wants to know,
against which type of mortgage do the banks normally lend home loan?
a) Simple Mortgage
b) Usufructuary Mortgage
c) English Mortgage
d) Equitable Mortgage
124. After preparing the Financial Plan of Mr.X, you have given following notes to the Plan:
I. These recommendations are made for your benefit only.

II. These recommendations are based on the information provided by you on your current
situation; we expect this information to be complete and accurate.
III. Returns on investments will depend on market conditions and the policy of fund
management followed by fund manager

IV. The investments planned for you are long term in nature; therefore volatilities of short term
in nature should be ignored. These notes are to your plan.
a) Disclosures
b) Disclaimers
c) Executive summary
d) Additions
125. Mr.X & Mrs.X want a written assurance from you that in case they appoint you as their Financial
Planner, in no case you will disclose their personal/financial information to any of your firm’s
partners and the same shall remain exclusively with you. With reference to FPSB Code of Ethics
examine the following statements in this context:
I. Yes, you can give such an assurance

II. No, you cannot give such an assurance
III. You can give such an assurance subject to specific written consent from all the partners of
the firm
IV. In this case the client should be dealt in personal capacity outside the scope of the firm
Which of the above statement/s is/are true? (2)
a) Both 1 & 4
b) Only 1
c) Both 1 & 3
d) Only 2
126. Mr. X wants to know from you the difference between the “Portfolio Management Scheme”
being offered by many prominent financial institutions and the services offered by you as a
Financial Planning practitioner. Examine the following statements:
I. In PMS there is a unique profit & loss sharing structure while a CFP is not entitled to
participate in profits of his/her client
II. PMS is more of a packaged product to suit broad requirements rather than meeting specific
needs of clients

III. PMS is mainly offered by financial institutions while Financial Planning service is mainly
dominated by Individuals only
IV. In PMS, the service provider may not cater to overall Financial Planning objectives of the
client
Which of the above statement/s correctly differentiate/s a PMS from a Financial Planning
Service?
a) Only 1
b) Only 1 & 3
c) Only 2 & 4
d) Only 1, 2 & 4
127. Mr. X has been buying gold ornaments from time to time as investment. You as a planner
however advise that she should also look at the features of Gold ETFs for investment purposes.
I. Gold ETFs score over physical gold as she can have same returns from gold, but without the
making charges
II. There is no wealth tax on Gold ETFs & long term capital gain becomes applicable after a
year
III. There is no entry load or exit load in a Gold ETF
IV. Problems relating to purity of gold bought, storage & insurance costs are avoided in Gold
ETFs
Which of the above statements are relevant and correct? (2)
a) 1 & 2
b) 2 & 3
c) 1, 2 & 4
d) 2 & 4

128. Mr.X is due to get refund from Income Tax Department of two earlier Assessment years. His
friend told him that this amount can be set off against the current tax liability. According to you
this information is .
a) True
b) False
c) True, if specific permission is taken from the assessing officer
d) True, if a letter is taken from the concerned Commissioner of Income tax and attached with
the Returns
129. Some time back Mr. X’s investment advisor, also a CFP, recommended him a savings product
stating that it offered an assured annual return of 12%. Mr. X was sceptic about the returns and
did not invest. You realize that the product has been misrepresented. In reality it is the simple
rate of interest with a lock in period of 10 years. According to you .
a) the advisor has violated Code of Ethics of Fairness

b) the advisor has violated Code of Ethics of Integrity
c) the advisor has violated Code of Ethics of Professionalism
d) the advisor has violated Code of Ethics of Diligence
130. Mr. X proposed to buy another life insurance policy which also offered Critical Illness Rider for
an additional premium. Mr. X was considering a sum assured of ₹50 lakh for the death benefit
and ₹ 2 Lakh under Critical Illness. Before finalizing the same Mr. X wants to know that in case
he is identified with a disease, covered under Critical Illness Rider, after 2 years of having taken
the policy, what amount would he receive as claim under the Critical Illness Rider? (2)
a) A sum of ₹ 2 Lakh shall be paid when such a disease is identified and certified by a Doctor.
b) Actual Expenses, subject to a maximum of the Rider amount, shall be paid after treatment
of disease.
c) Rider benefit is available only in case of death of the Insured person by the disease.
d) A sum of ₹ 2 lakh shall be paid when disease is identified and another ₹ 2 Lakh shall be paid
at the time of death.

131. Mr.X’s relative, Prashant, met with an accident while driving the car. His car insurance had
expired a couple of days before the accident. Mr. X wants to know whether Prashant’s claim
will be settled by the insurance company in such a situation.
a) This is to be seen in light of the governing terms and conditions of the expired policy.
b) If the accident occurs within 15 days after the expiry of policy the claim is payable.
c) The cover lapses the moment the policy expires thus denying him any claim.
d) Insurance company will take renewal premium along with penalty and then settle his claim.
132. Mr. X’s brother in law is an NRI. He wants Mr. X to make some investments on his behalf
whenever the right opportunity arises. You suggest
a) Mr. X’s brother in law should prepare a Notarized affidavit in Mr. X’s favour.
b) Mr. X’s brother in law should prepare a Special Power of Attorney specifying transactions
that can be carried out by Mr. X.
c) Mr. X should prepare a General Power of Attorney that gives him the right to do
transactions on behalf of his brother in law.
d) Mr. X should not get into such an arrangement due to complex tax laws related to NRI
investments.
133. Mr. X has not done any Estate Planning as of now. Even his father has not prepared any Estate
Planning documents. As Mr. X is the only son of his parents, along with his 3 sisters, what is
most suitable for him?
a) Mr. X’s father should first prepare his Will and on the basis of that Will Mr. X should prepare
his own Will.
b) Mr. X should prepare his own Will without waiting for his father’s Will.
c) There is no need for any Estate Planning as Mr. X is the only son of his parents.
d) Mr. X should prepare his Will by including his father’s property but with an inbuilt provision
for his sisters on account of that property.

134. During the initial discussions Mr. X wants to know from you the nature of compliance by which
you are bound to FPSB India’s Code of Ethics. You have explained to him that for every
practicing CFP certificate it is to adhere to FPSB India’s Code of Ethics.
a) Discretionary
b) Mandatory
c) Obligatory
d) Depends upon the country of operation
135. Keeping in view the present uncertainty in the global financial markets, Neeru wants to know
the most probable risk faced on their portfolio of GOI taxable bonds. According to you which
amongst the following is the most likely option?
a) Volatility
b) Price
c) Currency
d) Inflation
136. Mr. X has not prepared any Will as on date. He wants to know in case he dies intestate, as per
prevailing Hindu Succession law in India, which of his existing family member/s can be denied
share of his estate in case of a dispute.
a) His father.
b) His mother and father.
c) His daughter if she is married.
d) All members have a share on his property on an equitable basis.
137. Till date the couple has never given any attention to their individual insurance needs. Most of
the insurance needs of the family are taken care by the company’s group insurance policy
which provides all common risk protection to the family. You have explained to Mr. X that this
group insurance policy may not cater one important risk which is .
a) Life insurance

b) Health insurance
c) Liability insurance
d) Disability insurance
138. Mr. X has told you that Mr. X’s would be father in law wants to give a sum of ₹ 10 lakh to the
family on the occasion of Mr. X and Priya’s marriage next year. Mr. X wants to know from you
how should this gift be accepted from Tax Planning perspective?
a) It should be received in Priya’s name

b) It should be received in Mr. X’s name
c) It should be received in Mr. X’s father name
d) It should be received in the name of either Mr. X or Priya
139. Ajay has informed you that his insurance agent has not deposited one of the insurance
premiums collected in cash from them, to the life insurance company. The family came to know
about this when they got a notice informing the possible lapse of the policy. Ajay wants to
know the most suitable remedy available to them in such a situation.
a) They can claim premium from the insurance company for which the agent was working.
b) They can get a criminal case registered against the agent and also file a complaint against
the agent with the insurance company.
c) They can pursue with the agent to refund their premium.
d) They can get a case registered against the company and the agent, both.
140. Mr. X wants to know that if at any point of time they are required to withdraw some amount
prematurely from Aakash and Sanjana’s PO RD account, what rate of interest will be charged
from the account holders on the withdrawal amount as per PO RD Rules.
a) No premature withdrawal is allowed.

b) 1% + applicable rate of interest in PO RD account.
c) 2% + applicable rate of interest in PO RD account.
d) 15% per annum.

141. Mrs. X has told you that her husband is willing to open a Senior Citizen Saving Scheme account
after his retirement. She wants to know whether the family can also open a separate account in
the same scheme in her husband’s HUF name at the same time. According to you .
a) No they cannot.
b) Yes they can.
c) Yes, they can but subject to maximum amount deposited in her husband’s individual
account or ₹ 15 lakh whichever is lower.
d) Yes, they can but subject to maximum amount deposited in her husband’s individual
account or ₹ 15 lakh whichever is higher.
142. Mrs. X seeks your opinion on taking suitable risk covers, having seen the tragedy with her
husband. Your advice is .
a) she should go in for a term insurance to take care of her mortgage liability
b) she should take disability insurance for herself and health insurance for all members of the
family
c) a suitable health insurance for Clifford is must during his stay in Germany
d) All of the above
143. Before finalizing the Financial Plan, Mrs. X tells you that she wants to entrust the estate issues
to a solicitor friend, Mr. Larry D’Silva. Which of the following is your best stand?
a) This is not permissible as per the Rules of FPSB India.

Financial Plan for the said activity.
Plan and monitored along with the Plan.
d) You may enter into an MoU with the Solicitor and may also have a revenue sharing model.

144. Which of the following is true?
a) The primary method of dealing with this risk is life insurance.

b) The financial planner should request information about existing life insurance policies to
help assess whether adequate support is available. Different types of policies are
appropriate in differing circumstances.
c) The planner will evaluate the amount of insurance available and also whether the types of
policies in place are best suited to the needs of the client.
d) All of the above
145. You have started working on the financial plan for Dr. Mishra. One day he called you & told that
for Estate Planning aspects of his financial plan he shall be taking the services of his brother, an
advocate. As per FPSB Code of Ethics how would you proceed in this aspect?
a) This is not possible as the Financial Plan has to cover all aspects.
b) This must be stipulated in writing.
c) Prior consent of Dr. Mishra’s wife must be taken.
d) Prior consent from his brother must be taken.
146. One day, while sitting in the office of his stock broker, Dr. Mishra heard some discussions about
demutualization of Stock Exchanges in India. Dr. Mishra is unaware about this term and has
thus asked you about this concept.According to you .
a) In demutualization, the administration of Stock Exchange is kept isolated from its trading
brokers/members
b) Demutualization refers to privatization of all government owned Stock Exchanges in India
c) Demutualization refers to Self-Regulatory Organizations (SRO) structure of Stock Exchanges
in India
d) All of the above
147. Dr. Mishra is planning to take a life insurance policy as per you advice. His agent has suggested
him that he should take “Critical Illness Rider” on the new policy and thereby save 60% portion

of his health insurance premium by taking this rider with this policy. Dr. Mishra wants to take
your advice whether he should replace his health insurance by this rider as by doing this
transaction he is saving 60% of his current health insurance premium. According to you, he
should .
a) Not replace his health insurance with this rider as both have different features
b) Replace this health insurance as there is a direct saving on the premium
c) Reduce his health cover by 50% and take the 50% rider as suggested by the agent
d) Both options are same and anyone may be opted
148. Recently one of the life insurance agents has informed Dr. Mishra that if one takes a life
insurance policy under “Key Man Insurance”, one can get deduction of the premium of this
policy from their taxable income. According to you .
a) Dr. Mishra can claim deduction but the maturity value of this policy shall be taxable in his
hands
b) Key Man Insurance is not applicable in his context
c) Ts is applicable on second life insurance policy only
149. Acting upon your advice Dr. Mishra decides to take a life insurance plan for himself. At the time
of choosing mode of payment, Dr Mishra has asked you the difference between various modes
of payment of insurance premium (monthly/quarterly/half yearly/yearly) from claims
perspective, in case if any. According to you .
a) Monthly mode is better because in case of claim the same shall be payable against the
minimum possible paid premium
b) There is no difference among all options from claims perspective
c) Yearly mode is better because it offers a rebate in premium to the Life assured
d) Choice may be different depending upon the age of the life assured
150. An understanding of the client’s ------------ is necessary for several reasons. First, it enables the
financial planner to assess the importance of a particular income source and to plan for its
potential replacement in case it suddenly ceases (such as salary during a wage earner’s
disability). In addition, it helps the planner assess the client’s ability to meet financial goals by
allocating some of the income to savings and investments or consumption, as appropriate.
a) Income
b) Revenue
c) Expenses
151. Sneha wants partition of his father-in-law’s HUF to claim her share and her husband’s share out
of the HUF’s assets. In principle, Dr. Mishra is not keen for the same and wants to know
whether his wife can legally demand partition of his father’s HUF as she is also one of the
member in the same?
a) Yes
b) No
c) With prior permission from IT Department only
d) Data insufficient
152. A Mutual Fund agent has told Dr. Mishra that bigger the AUM of the fund the better it is. Which
of the following statements are correct?
1. The bigger the fund AUM, the lower the expense ratios and in that sense it could be better.
2. The bigger the funds AUM, lesser are the chances of showing break-out returns as stock
buying becomes difficult without moving the price upwards.
3. The bigger the fund AUM the worse-off a mid & small cap fund would be, due to its limited
pool of stocks.
4. The smaller the AUM of a small cap fund the better it is due to lower expenses & higher
returns.
a) Only 1 is correct
b) Only 1 & 2 are correct
c) Only 1, 2 & 3 are correct

d) All are correct
153. While interacting with you during the data collection sessions, Gunjan and Neerja became so
impressed with your professional approach and the trust created that the couple requested you
to become a whole time legal guardian of their kids regarding execution of all required financial
steps at every stage in future even without further recourse to the couple. As per FPSB Code of
Ethics, is this possible for you?
a) Yes
b) Yes, but you can do it in your individual capacity and not in professional capacity.
c) Yes, but in that case you will not be in a position to charge any professional fee from the
couple.
d) No
154. Gunjan wants to know which of the health insurance plans of insurer XYZ he should opt for,
from the cost effectiveness perspective, if he wants to take minimum sum assured of ₹ 1 lakh
per member of his family.
a) Individual Member Policy

b) Family Floater Policy
c) Gunjan should take 50% risk cover under both the policies
d) Gunjan should take 75% cover under individual policy and 25% cover under Family floater
policy
155. Gunjan & Neerja want to ensure a life annuity for their kids. You have suggested an immediate
annuity plan from a life insurance company in which they can buy the policy by paying a lump
sum premium and the kids will start getting annuity from the end of 1st policy year. Gunjan and
Neerja will be the proposers for the beneficiaries Mayank and Manas, respectively in these
policies. The Life Insurance company is giving 4 annuity options. From the perspective of
ensuring maximum benefit to their children, which option should be chosen by the couple?
a) Life Annuity

b) Life Annuity certain for 15 years
c) Joint life last survivor
d) Joint life last survivor with return of purchase price
156. The Post Office MIS accounts of Mayank and Manas were opened on 01-10-2020. The couple
wants to know how much amount will be received from each of these accounts if they are
closed today on 6th Sep 2021
a) No premature closure is allowed in PO MIS account within one year

b) ₹ 2.94 lakh from each account
c) ₹ 2.97 lakh from each account
d) ₹ 3.00 lakh from each account
157. Gunjan wants to know that the income from PO MIS accounts of both kids shall be added in
whose taxable income as the amount of one account was gifted by the Gunjan’s parents and
that of other account was gifted by Neerja’s parents?
a) Income from both accounts shall be added to the taxable income of Gunjan.
b) Income from both accounts shall be added to the taxable income of Neerja.
c) One account's income in Gunjan’s and the other in Neerja’s taxable income.
d) Income shall not be added in the incomes of Gunjan and Neerja.
158. Amaranth prefers Comprehensive Insurance for his fleet of taxies. This time while renewing his
policy, he was surprised to notice that the premium was more for one of the taxis than what he
paid last year. On investigating, he found that the insurance company has charged a “Malus” on
the premium and therefore the premium is more. Amaranth wants to know what “Malus” is.
You explain “Malus” as the extra premium which insurance company charges on the
.
a) Basis of his overall claim experience in motor insurance policies issued by that company in
the last 3 years

b) Basis of claim lodged by the policy owner in the last year policy
c) Basis of accidental track record of the driver of the insured vehicle
d) Commercial passenger carrying vehicles
159. Amaranth wants to take a life insurance policy on the life of his father as well as both his
brothers, because all of them are playing a crucial role in managing his business. However, in
case of any eventuality he wants to reserve all legal rights of receiving the policy benefits in his
name. He wants to know whether it is legally possible for him.
a) Yes, he can take the policy in the desired way.

b) Yes, but he cannot reserve the right to receive the policy benefits in his name.
c) No, in the absence of insurable interest he cannot take their life insurance policy.
d) Data insufficient
160. In your initial meeting, to make an impression on your client, you discuss the Financial Plan
made by you for a famous doctor and also his spending habits with Arvind. Which Code of
Ethics prohibits you to have such a discussion with Arvind?
a) Code of Ethics of Professionalism

b) Code of Ethics of Confidentiality
c) Code of Ethics of Fairness
d) Code of Ethics of Integrity
161. You advise Arvind to buy a ₹ 50 Lakh life insurance term plan. While filling the proposal form for
purchase of this term plan Arvind does not mention details of another Life Insurance policy,
taken by him earlier, from a different insurance company. In case of any mishap, under which
principle the claim of Arvind could be questioned by the present Insurer, if facts of his earlier
insurance policy become known?
a) Principle of Insurable Interest

b) Principle of Utmost Good Faith
c) Principle of Waiver and Estoppel

d) Principle of Indemnity
162. While analyzing and evaluating Arvind & Sudha’s personal and financial information in his
Financial Planning process, which of the following tasks have been completed by you at this
stage?
1. Identifying alternative investment vehicles.

2. Identifying financial strengths and weaknesses.
3. Recommending specific tax strategies.
4. Preparing preliminary financial statements.
a) 2 and 4.
b) 1, 2 and 3.
c) 2, 3 and 4.
d) 1, 2, 3 and 4.
163. Tarun wants to know whether he is entitled to deal with you on behalf of Ragini for preparation
and execution of her Financial Plan. As per FPSB Code of Ethics, what is the correct option in
this context?
a) Tarun cannot represent Ragini on such matters as the assets are in her name.
b) All investments should first be transferred in Tarun’s name. Only afterwards Tarun can deal
with you.
c) You can verbally cross check with Ragini and if she has no objection, you can deal with
Tarun.
d) You should seek written authority from Ragini before start of discussions or draft of letter of
engagement.
164. Tarun has heard about professional indemnity policy and would like to know the applicability of
this policy in the context of Ragini. According to you .
a) By use of this policy, Ragini can assure her sponsors of the performance of her obligations
towards them

b) By use of this policy, Ragini can protect her sponsors from the risk of her non-performance
in the competitions
c) This policy can insulate Ragini from the unseen losses by the persons having her confidential
financial information
d) This policy is not applicable in her context
165. While drafting a risk management plan for Ragini, you have arrived at her initial insurance
requirements as follows:
I. Life insurance
II. Health Insurance
III. Disability Insurance
IV. Property Insurance
According to you what should be the most suitable priority order of these insurance needs for
Ragini from the given options? (2)
a) I, III, II, IV
b) II, III, IV, I
c) III, IV, II, I
d) III, I, II, IV
166. Tarun is the nominee in the existing Post Office NSC investments of Ragini. Tarun wants to
know in case these NSCs are pledged to a bank for availing a loan, what impact will it have on
his nomination in these NSCs.
a) His nomination shall stand as it is.

b) His nomination shall stand cancelled as soon as any pledge is made.
c) No pledge is permitted for NSC.
d) Decision on carry forward of existing nomination upon pledge of NSCs is a privileged right of
the Post Master of the Post Office concerned.

167. Tarun wants to know relative advantages of having exposure to Gold as an asset class through
Gold Exchange Traded Funds (Gold ETFs) which can be purchased and traded as units through
the Demat A/c. Which of the following is mostappropriate in this context?
a) In Gold ETF, Long Term Capital Gains tax is levied after one year of purchase against 3 years
in case of physical Gold.
b) In case of an investor holding physical Gold, he has to pay Wealth tax after the net wealth
crosses a certain limit.
c) Most of the Gold ETF schemes available in India reflect international prices of Gold and are
insulated from local demand-supply factors
d) Securities Transaction Tax (STT) is applicable on purchase and sale of Gold ETF.
168. Ragini wants to donate to the National Sports Fund some amount out of the ₹ 1 crore which
she is likely to get as award. Tarun wants to know if any benefit is available to Ragini under the
Income Tax Act on account of this donation.
a) The whole amount received shall be tax free and there shall be no tax benefit on such
donation.
b) The amount received will be taxable but the part donated will be tax free under section 80-
G.
c) The donated amount can be off-set against her earnings from endorsements.
d) No benefit will be available as her taxable income is above ₹ 10 lakh.
169. Tarun is eager to know when is the right time for him to start Estate Planning for Ragini. In your
opinion the same .
a) Right now
b) After Ragini’s marriage
c) After Ragini’s retirement
d) There is no need for her Estate Planning as she is having sufficient wealth and there is no
dependent on her

170. While interacting with you, Sahil came to know about your investing style, viz. Direct Equity
investment and some schemes of Mutual Funds. He wants to know whether you can manage
some of his money in your investments and assign him appropriate share in the profits thereof.
As per FPSB Code of Ethics is it possible for you?
a) Yes
b) Yes, but with prior permission from FPSB against a written proposal letter from Sahil
c) Yes, but with a proper written agreement in which all terms and conditions must be
stipulated in advance
d) No
171. Employment with a ---------company generally has more uncertainty than employment with a ---
-------, ------------company. The financial planner needs to make a judgment regarding the
stability of the income stream because it can affect what types of investments might be
appropriate, how much debt can be handled by a household, and other financial advice issues.
a) Mature company, Small start up

b) Start-up, mature and financially sound company
c) Big name in industry, start up
172. Sahil wants to accumulate retirement funds in one of the government schemes. His friend has
suggested him ‘New Pension Scheme’ of the Government of India, which is effective from 01-
01-2004. Sahil wants to know whether the said scheme has provisions whereby he can also
start investing in this Scheme in near future.
a) Yes
b) No
c) The Scheme is only for Senior Citizens
d) The Scheme is only for Government employees

173. Sahil has informed you that his previous employer has not paid gratuity due to him till this date.
Sahil now wants to know if any remedy is available to him in this matter.
a) Sahil can move an application to the Controlling Authority which may further forward it to
the District Collector for recovery of the same from the company.
b) Sahil can go to Civil Court and file a recovery suit against the company.
c) Sahil can go to Labor Court and file a recovery suit against the company.
d) Sahil can file a police complaint against his previous employer and get a cheating case
registered.
174. Sahil has informed you that his Post Office MIS account is maturing next month. He wants to
know whether this account can be extended further and, if so, for what duration?
a) Cannot be extended.
b) Can be extended for 24 months.
c) Can be extended for 60 months.
d) Can be extended for 72 months.
175. Sahil wants to liquidate immediately some of his assets for investing in fresh business
opportunities. As he would have large cash with him and it may take about 2 months before the
same is invested in business purposes, Sahil wants to know the ideal investment option for this
money for this short period. Your suggestion would be .
a) he should invest this money in a Bank FDR

b) he should invest this money in Long Term Bonds
c) he should invest this money in the Liquid Funds Scheme of a Mutual Fund
d) he should invest this money in Equity Growth Scheme of a Mutual Fund
176. Sahil has informed you that the joint MIS account of Aniket& Akhil was opened from the sale
proceeds of some gold ornaments which were gifted to Namrata by Sahil’s father. Sahil wants
to know the tax treatment of the interest income received from this account?
a) Interest income shall be taxable in the hands of Sahil.

b) Interest income shall be taxable in the hands of Namrata.
c) Interest income shall be taxable in the hands of Sahil’s father.
d) Data insufficient to ascertain the taxability of the interest.
177. Sahil’s father-in-law is a well-established businessman and Namrata is their only child. He wants
to include Sahil as a member in their HUF. Is it possible?
a) Yes
b) No
c) Yes, but with prior permission from IT department
d) Yes, but first Sahil’s father-in-law should prepare a non-recoverable Will in favor of Sahil
178. While drafting a Financial Plan, on examining the annual cash flow of Mr. X you have observed
one crucial factor. How would you explain that factor?
a) His personal expenses’ proportion is too high and needs to be curtailed.

b) His net cash flow is too high to justify a small housing loan.
c) Excess cash which is not routed to a suitable liquid and tax efficient investment.
d) Net cash flows will decrease in future year
179. Which of the following is qualitative information?
a) How the client makes investment decisions,

b) What the client expects from investments,
c) What the client knows about investing,
d) How the client views risk, and so on.
e) All of the above
180. While entering into a relationship with you, Mr. X assumed that you being a practicing Certified
Financial Planner, you are fully able to take care of the execution of all aspects of his Financial
Plan, i.e. Taxation, Insurance, Investments, etc. As per FPSB Code of Ethics, what is the best
proposition in this context?

a) This is the right assumption which can be made about all Certified Financial Planners
b) The scope and limitations of the services of the Certified Financial Planner needs to be
disclosed in the beginning, specifically in writing, by the Certified Financial Planner to the
client.
c) A Financial Planner can never take care of all aspects of a Financial Plan.
d) A Financial Planner is concerned with only making a Financial Plan and not its execution.
181. Mr. X is seeking your advice regarding suitability of a health insurance plan for his family. Taking
into account the health status of the family, what would be your advice?
a) The family has good liquidity to take care of any sudden medical expenses, hence no health
insurance policy is required.
b) Given fairly good medical history, they should postpone taking health insurance for 5 more
year
c) A floater policy which covers the medical expenses of any member of the family, as well as
disability insurance of Mr. X, at least, must be taken.
d) Mr. X can save upto ₹25,000 under section 80 D by taking a suitable health cover to that
extent.
182. Mr. X wants to know the tax treatment of the withdrawals by way of switch-outs he is making
out of his Money Market Mutual Fund (MMMF) to the equity scheme and in the pension
scheme.In your opinion .
a) the income related to every monthly withdrawal shall be subject to normal rate of tax
applicable to Mr. X
b) the income related to monthly withdrawals shall be subject to Capital Gains Tax as is
applicable to debt instruments
c) the MMMF being a mutual fund scheme, all income received on withdrawal shall be tax free
d) these being switch-outs, no money is being withdrawn, hence no incidence of tax

183. Recently in an unfortunate event, one of Mr. Agrawal’s brother died in a road accident. He was
a bachelor and he died intestate. His parents were living with his deceased brother. Apart from
Mr. Agrawal there are three other siblings of the deceased. Mr. Agrawal wants to know the
applicable order of priority as per Hindu Succession Act for the disposition of his deceased
brother’s property. (3)
a) Both parents will get the priority over all siblings of Mr. Agrawal including Mr. Agrawal
himself.
b) All siblings of Mr. Agrawalwill get the priority over their parents.
c) Mr. Agrawal’s mother will get priority over her husband and sons.
d) All of them will have equal right over the property of the deceased
184. You have selected a Mutual Fund scheme which has stocks in its portfolio which move together
and have a high correlation. How will that impact the risk and return of Mr. X's portfolio?
a) The Mutual Fund portfolio will have a return that is lower than the stocks included in it, but
have a risk that is higher than the risk of the stocks.
b) The Mutual Fund portfolio will have a return that is the average of the stocks included in it,
but have a risk that is lower than the risk of the stocks.
c) The Mutual Fund portfolio will have a return that is the average of the stocks included in it,
but have a risk that is higher than the risk of the stocks.
d) The Mutual Fund portfolio will have a return and risk, which lies in the range of risk and
return of the stocks included in it.
185. You, being a Financial Planner, would help Mr. X to set his financial goals in .
a) Any term as desired by him

b) Both current & future money terms
c) Current money terms
d) Future money terms

186. The estimated value of a real estate asset in a financial statement of Mr. X, prepared by you
would be based upon the:
a) Basis of the asset, after taking into account all straight-line and accelerated depreciation.
b) Mr. X's estimate of current value.
c) Current replacement value of the asset.
d) Value that a well-informed buyer is willing to accept from a well-informed seller where
neither is compelled to buy or sell.
187. Mr. X has asked you to give him a written assurance that if you prepare a Financial Plan for him,
then in no case you would reveal any of his information to any other person, including his
family member As per FPSB Code of Ethics, is it possible for you?
a) Yes
b) No
c) Yes, but with prior consent of all relevant family member
d) No, because client has no authority to demand such type of assurance
188. After working on the restructuring of the existing portfolio of Mr. X Chaudhary, you have
recommended for a major shift into equities and he has acted upon your advice implicitly.
Unfortunately in the current year, equities performed badly and Mr. X’s portfolio lost almost
50% of the original investment. If he blames you for the same, then on what ground you may
seek relief?
a) Volenti non fit injuria (to a willing person one cannot do injustice)
b) Caveat emptor (let the buyer beware)
c) Cuiusvishominisesterrare (every human can make a mistake)
d) Ignorantialegis non excusat (ignorance of the law is no excuse)
189. Mr. X wants to take your advice about his Retirement Planning. He is eager to know the time
when he should plan for his retirement?
a) Immediately

b) At the time of dissolution of his joint family
c) In case he does not get re-elected as an MLA
d) After the demise of his father
190. Mr. X is seriously concerned with the on-going rising inflation. Taking a bitter experience of his
earlier equity investments, he is keen to do some investments in debt instruments. Keeping in
view the constantly rising inflation rate into account, which type of investment, from the given
options, is advisable for Mr. X in the current scenario?
a) Bank FDR
b) Long Term Bonds
c) Short Term Bonds
d) Floating Rate Bonds
191. Mr. X has not done any Estate Planning as of now. Even his father has not prepared any Estate
Planning documents. As Mr. X is the only son of his parents, along with his 3 sisters, what is
most suitable for him? (2)
a) Mr. X's father should first prepare his Will and on the basis of that Will Mr. X should prepare
his own Will.
b) Mr. X should create his own Will without waiting for his father’s Will.
c) There is no need for any Estate Planning as the family is a joint family & Mr. X is the only son
of his parents.
d) Mr. X should create his Will by including his father’s property but with an inbuilt provision
for his sisters on account of that property.
192. Professional judgments helps bridge the process of financial planning with the practice of
financial planning.
a) True
b) False

193. Financial Planner stands in --------------relation with the client. A financial planner places the
interest of the client first, at all times acting honestly, in utmost good faith, and in a manner he
or she reasonably believes to be in the best interest of the client.
a) Fiduciary
b) Best
c) Better
194. A financial planner-client relationship is ----------------and based on open and regular

communication that alerts the client to any potential conflict or bias, to any change in business
practices or philosophy, or to any impending actions or consequences so that the client can
anticipate or mitigate their impacts
a) Transparent
b) Cordial
c) Fiduciary
195. How does the financial planning professional put a client’s interest first?
a) Abide by the supporting principles.

b) Act in accordance with professional expectations.
c) Provide full and appropriate disclosure.
d) Act with transparency.
e) Manage conflicts of interest.
f) Secure fully informed client consent.
g) Communicate the compensation and remuneration model.
h) Doing these things will go a long way toward being a financial planning professional.
i) All of the above

196. When government benefits are not provided or not sufficient, privately-owned health
insurance cover is necessary
a) True
b) False
c) Not required
197. --------------------- is the ability to be aware of emotions and direct your behaviour appropriately. -
------------------ allows an individual to delay initial, current needs so you can pursue more
important, significant goals.
a) Self-management
b) Self- awareness
c) Emotional nature
198. It is the ability to pick up on other people’s emotions (accurately) and understand what is
happening with them. It may include stepping into the other person’s shoes to feel what they
feel, even when doing so does not mirror your own feelings.
a) Self-management
b) Self- awareness
c) Social competence
199. -----------is the ability to use awareness of your own emotions, along with those of others, to
successfully manage the interaction. Doing this encompasses clear communication and
effective handling of conflict. This skill supports your ability to engage with many people,
including those of which you may not be particularly fond.
a) Relationship management
b) Social awareness

c) Empowerment of self
199. --------------------- is more than simply meeting with a client, hearing what they want and providing a
potential solution or two. For a Financial Planner, ----------------requires learning about the client
and their dreams and goals.
a) Client engagement
b) Relationship management
c) Social awareness
200. ------------is the process of learning about the client – really learning about the client ------------ can
include both qualitative and quantitative information, and the primary focus for the financial
planner is to discover the client’s life dreams and goals, along with information to help facilitate
the process of developing strategies to help the client achieve those goals. What is this process
called?
a) Discovery
b) Collecting data
c) Analysis

PART - 2
Case Study Based MCQs
(3 Mark Questions)
In this workbook, here you have 10 Comprehensive Cases and each case followed by 25 to 40
questions for your to practice. Remember, your exam will have only 1 case but since that’s not shared
in advance, hence you need to practice more case studies and understand what type of questions
generally come and how to solve them.

Case Study – 1
(Reference Date: 1st April, 2020)
Ashwin, aged 34 years, is employed with an oil exploration company since December 2003. He is an
engineer by profession and is part of project team that manages oil rigs worldwide. He has to tour
extensively in different parts of the world in connection with the company’s projects. He has
approached you, a CFPCM practitioner, for preparing his Financial Plan. He is staying in his own house at
Vadodara. His wife Sumedha, aged 31 years, is working in a private sector bank as Manager. They have
a son Prateek aged 4 years, and a year old daughter Aslia. The family’s monthly house hold expenses
are ₹70,000 p.m. (excludes EMI on loans and insurance premium). Ashwin’s parents stay in their
ancestral house at Bikaner. His father is engaged in a small business. Ashwin however supports his
parents financially to the extent of ₹ 10,000 p.m.
Ashwin’s Monthly Salary (FY 2020-2021)

Basic Salary : ₹ 60,000
Dearness Allowance1 : 50% of Basic salary
House Rent allowance : ₹ 15,000
Transport Allowance : ₹ 7,500
Medical Reimbursement : Actual expenses up to ₹ 1,250 per month
Entertainment Allowance : ₹ 7,500
PF & Superannuation : 12% of Basic Salary
Sumedha’s Monthly Salary (FY 2020-2021)

Dearness Allowance : 30% of Basic salary
Executive Allowance : ₹ 7,500
PF & Superannuation : 12% of Basic Salary
Couple’s Assets & Liabilities (As on 31stMarch, 2020)
1 100% of DA received forms part of salary for retirement benefits. DA not part of PF Contribution.

Assets:
Hous : ₹ 75.00 lakh (Municipal Value)
Car : ₹ 3.50 lakh (Depreciated Value)
PPF (maturity on 1st April 2027) : ₹ 6.20 lakh (Account balance in Ashwin’s name)
Insurance – Money Back policy2 : ₹ 4.00 lakh (sum assured)

Child Plan – Life Insurance3 : ₹ 20.00 lakh (Sum Assured)
Gold Ornaments : ₹ 6.50 lakh (Valued 22 karat less 10%)
Sovereign Gold Bonds4 : ₹ 2.90 lakh (quoted value)
Equity Mutual Fund Scheme5 : ₹11.87 lakh
Balanced Mutual Fund Scheme : ₹ 3.28 lakh
Debt Mutual Fund Scheme6 :
₹ 7.67 lakh
Portfolio of Equity Shares : ₹ 18.32 lakh
Term deposits : ₹ 3.50 lakh (in Sumedha’s name)
Cash/Bank Balance : ₹ 2.25 lakh (Cumulatively in accounts of Ashwin &
Sumedha)
Liabilities:
Home loan7: ₹ 15.40 lakh (Principal Outstanding)
Car Loan8: ₹ 2.77 lakh (Principal Outstanding)
Goals:
2 Ashwin purchased the 20-year policy on 18th November, 2013; annual premium ₹ 26,864; 20% of sum assured (SA) payable
on survival each on expiry of 5th, 10th and 15th years and 40% of SA payable with accrued bonuses on survival of the term
3 Purchased by Ashwin on the life of Prateek on his 3rd birthday for a term of 20 years; annual premium ₹ 44,347
4 Sumedha purchased 100 units @Rs.3,150 in September 2019 Series, maturity date 30-Sep-2027, coupon @2.75% p.a. payable
half-yearly on 30-Mar and 30-Sep every year.

5 Four schemes out of which one is diversified large cap growth fund (Rs. 5.71 lakh), one is mid-small cap fund (Rs. 3.83 lakh),
and two are sector specific funds on Banking (Rs. 1.26 lakh) and Information Technology (Rs.1.07 lakh).
6 Two schemes, one is short term debt fund in Growth option (current value Rs. 2.59 lakh) acquired through Rs. 10,000
monthly SIP continued for 2 years, the last SIP on March 1, 2018; the other is Gilt fund subscribed in New Fund
Offering (May 20, 2017) for Rs. 2 lakh in Growth option with further contributions of Rs. 1 lakh each on Feb 11, 2018
and on June 17, 2019
7 Home loan of Rs. 20 lakh taken on 1st November, 2014 to acquire a house of 1050 sq.ft. built up area valued at Rs. 40
lakh then. Loan details: fixed interest of 8% p.a., tenure 15 years, first EMI paid on 1st December, 2014. Loan shared
in 60:40 ratio, major share by Ashwin
8 Car loan of Rs. 5 lakh taken on 1st April, 2018 at a fixed interest of 11% p.a. for a 4-year term. First EMI paid on 1st
April, 2018.

1. To provide for higher education of Prateek and Aslia. The expenses, at current cost, required for
each child for 4 years; ₹8 lakh at their respective age of 18, and ₹ 3 lakh p.a. for 3 subsequent
years; cost escalation 8% p.a.
2. Marriage expenses of ₹ 20 lakh (current cost) for each child at their respective age of 27 years
which increases 8% p.a.
3. Retirement corpus at Ashwin’s age of 60 to sustain the same lifestyle till their expected life time.
4. A bigger house 3 year from now, valued at ₹ 1.40 crore today.
5. To start building a separate dedicated fund for annual vacation expenses of ₹ 2 lakh (current cost)
to be utilized during 15 years to Ashwin’s retirement; cost escalation 8% p.a.
Life Parameters:
Ashwin’s Expected Life : 80 years
Sumedha’s Expected Life : 82 years
Assumptions regarding pre-tax returns on various asset classes (1-3 years):

1) Equity & Equity MF Schemes/Index ETFs : 11.00% p.a.
2) Balanced MF Schemes : 9.50% p.a.
3) Bonds/Govt. Securities/Debt MF Schemes : 7.50% p.a.
4) Liquid MF Schemes : 6.00% p.a.
5) Gold & Gold ETF : 6.00% p.a.
6) Real Estate Appreciation : 6.50% p.a.
7) Bank/Post Office Term Deposits ( > 1 year) : 7.25% p.a.
8) Public Provident Fund/EPFO : 7.75% p.a.
Assumptions Regarding Economic Factors:

1) Inflation : 5.00% p.a.
2) Expected Return in Risk Free Instruments : 5.50% p.a.
Cost Inflation Index:
2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 1 (Ashwin)
Reference Date 1st April 2020
(1) Ashwin wants to know the amount needed by him to buy the new house after 5 years. This
could be done by utilizing the net amount from the sale proceeds of his existing house after 5
years. After deducting the outstanding loan amount and a sum of ₹ 10 lakh towards meeting
capital gains tax liability on existing house and furnishing expenses of new house. [3 marks]
A) ₹ 1.03 crore B) ₹ 84 lakhs
B) ₹ 1 crore D) ₹ 1.08 crore
(2) You give a quick look at the assets and liabilities of the couple, and before drawing a
comprehensive picture of adequate insurance protection and a strategy to achieve the same,
you suggest to take cover on an immediate basis, which is . [2 marks]
A) They must take Mortgage Redemption Insurance or an equivalent term insurance to
cover. Their outstanding loans
B) They must take Accident Insurance
C) They must take Critical illness insurance
D) They must take Unit Linked Insurance Policies for their financial goals
(3) Calculate Net worth of Ashwin and Sumedha, Considering financial assets only. [3 Marks]
A) ₹3782000 B) ₹ 5599000
C) ₹ 1817000 D) ₹ 2655000
(4) You compute the value of additional life cover ( ignoring child plan) for Ashwin by considering
current household expenses, required inflation adjusted to the extent of 70% until Sumedha
age of 55 years and 50% of then expenses for the remaining period of her expected life by
considering investment in debt MF schemes. This cover required comes to .[3 marks]
A) ₹ 2 crore B) ₹ 1 crore
C) ₹1.40 crore D) ₹1.55 crore

(5) Ashwin requires Education expenses for each child at their respective age of 18 (₹ 8 lakh at
current cost) and for three subsequent years (₹3 lakh p.a. at current cost). Expenses escalate at
8% p.a. All withdrawals are made in the beginning of the financial year. What monthly amount
is to be invested in equities with immediate effect up to one year prior to the required
expenses for the First Child to achieve this goal? (5 Marks)
A) 21800 B) 27000
C) 26553 D) 25223
(6) For accumulating funds for the goal of annual vacations, you suggest, a lump sum investment of
₹ 15 lakh and further investment of ₹ 3lakh annually increasing by 25% every year from next
year till 7th year. The amount accumulated from this fund is switched to risk free instrument 3
years prior to the actual usage for the purpose. What return would be needed by Ashwin from
the asset allocation fund to achieve the goal? [4 marks]
A) 15% B) 16%
C) 9% D) 10%
(7) Towards the marriage goal of the children, you suggest Ashwin to make maximum permissible
subscriptions to his PPF account towards the end of every financial year and extend the account
thrice beyond initial maturity for terms of 5 years each with similar subscriptions. The fourth
term is maintained without further contribution. Ashwin shall withdraw about 50% of
accumulation for the marriage expenses of Prateek and the remaining for the marriage
expenses of Aslia. What are the expected individual withdrawals and shortfalls in meeting the
marriage expenses? ( Assuming marriage expenses escalates @ 8% p.a. ) [5 marks]
A) Pratik ₹ 53 lakh, 39% shortfall; Aslia ₹ 33 lakh 70% shortfall
B) Pratik ₹ 63 lakh, 38% shortfall; Aslia ₹ 33 lakh 70% shortfall
C) Pratik ₹ 60.7 lakh, 48% shortfall; Aslia ₹76 lakh 49% shortfall
D) Pratik ₹ 54 lakh, 39% shortfall; Aslia ₹ 33 lakh 70% shortfall

(8) Calculate Ashwin income tax liability for AY 2021-22. If he contributes maximum permissible
contribution to his PPF account. Also, he pays 5000 p.a. Health Insurance premium for his
dependent brother, 20000 p.a. for health insurance for his family and 30000p.a for his parents
who are not senior citizen he earns interest of 10500 on his savings bank account and 90000
(net) on the fixed deposits during FY 20-21. [5 Marks]
A) ₹ 99040 B) ₹ 18540
C) ₹17480 D) ₹166680
(9) Ashwin invested in shares of XYZ ltd on 12th October 2017₹35 below its Face Value. He
received Dividends of ₹20 per share, ₹30 per share on 8th December 2018 and 30th November
2019 respectively. If he sells the entire holding of shares at the par value today, what returns
would he have got from this transaction? [3 Marks]
A) 46.5% B) 45.6%
C) 44.6% D) 46.6%
(10) Ashwin saw the acronym CFPCM against your name in your business card. He wants to know
about the same. You tell him that . [2 Marks]
A) CFP marks are owned outside the US by US based FPSB Ltd
B) FPSB India is the owner of CFP marks within Indian Territory
C) The US based FPSB Ltd. is licensed globally to administer CFP marks
D) The US based FPSB Ltd. and FPSB India are respectively licensed to issue CFP certification
in US and India
(11) Ashwin wants to know what the most appropriate instrument is/are to replicate exactly the
equity market returns over a sufficiently long period with the least cost and risks. [2 Marks]
(i) Diversified Growth schemes of Mutual Funds
(ii) Equity Index Funds
(iii) Growth Option of ULIPs
(iv) Exchange Traded Funds of Equity Indices
(v) A portfolio of Large Capitalized stocks
A) (i) and (ii) B) (ii) and (iv)
C) (i) and (iii) D) (iv) and (v)

(12) As the rates in bank fixed deposits would be headed lower in the near future, you advise
Ashwin to invest the FD maturity proceeds in a Mutual Fund scheme investing in long dated
Government Securities. Your investment rationale, theoretically, is: [2 marks]
A) Invested for more than one year, the debt oriented Mutual Fund scheme would result in
tax efficient return, though pre-tax return may match with bank FD.
B) With softening interest rates, the price of long dated Government Securities would also
fall, thus better yield profile of such securities.
C) This is a play on long duration with expected moderate trend in interest rates, thus
scheme return though capital appreciation is expected.
D) Higher actual income would be expected from the scheme with strengthening yield as the
interest rates fall in the future
(13) You have advised Ashwin to buy a Term Insurance for his life and also for the life of Sumedha,
he wants to know the importance of waiver of premium rider? [2 Marks]
A) It is useless as there will not be any amount to be received from the Insurance Company
at the time of maturity of the policy
B) It is very useful as all future premiums would be waived by the Insurance Company in case
the Life assured becomes totally and permanently disabled
C) It is same as Permanent Disablement rider hence need not be mentioned separately
D) It is inbuilt with all the Term Insurance plans and thus need not be mentioned separately
(14) You advised Ashwin and Sumedha about the parameters considered post-retirement
investment return 8%, inflation 5% and specified longevity while working out retirement
corpus. You informed that even marginal fall in expected return or rise in inflation post
retirement and a slightly longer life span would adversely impact sustainability of corpus. You
worked out the revised corpus by considering 6.5% annual yield, 5.5% inflation and 5 more
years to Ashwin longevity. Additionally, he needs medical expenses of ₹12000 p.m.(present
cost) after his retirement till Sumedha’s lifetime in both cases. What additional funds need to
be accumulated by Ashwins’s retirement age? Also, by what percentage the retirement
expenses should be curtailed to retain this cushion? [5 Marks]
A) ₹1.46 crore; 18.66% curtailment B) ₹ 1.9 crore; 22% curtailment
C) ₹ 85 lakh; 18.60% curtailment D) ₹ 80 lakh; 25% curtailment

(15) Considering the above revised corpus needed, you envisaged Ashwin that corpus need to be
accumulated by considering only Equity shares portfolio holding along with a separate Asset
allocation fund. He invest 70:30 in Equity: Debt for 5 years, subsequently, the accumulated
amount in asset allocation funds and further monthly investment is rebalanced in the ratio of
40:60 in Equity and Debt for the next 15 years. At this stage, the accumulation in equity, Debt
and equity shares portfolio are redeemed and transferred to a designated retirement fund
yielding 8% p.a. which is used for drawing retirement expenses. Cumulative Monthly
investments maintained up to this period are double in the last 6 years up to retirement. What
is the monthly investment required? [4 Marks]
A) ₹ 32910 B) ₹44850
C) ₹ 28410 D) ₹ 29900

Additional Questions
Q.1 Which is a better investment if ashwin & sumedha want to accumulate 200 grams of gold for
the marriage of their children?
A) Physical Gold B) Gold ETF
C) Both D) None of these
Q.2 Why Ashwin wants to take house hold policy?

A) Household policy covers on reinstate value and goods cover on their market value
B) Household policy covers Both house & goods cover on market value
C) Household policy covers on reinstate value.
D) None of the above
Q.3 In your initial meeting, to make an impression on Mr. Ashwin, you discuss the Financial Plan
made by you for a famous doctor and also his spending habits with Ashwin. Which Code of Ethics
prohibits you to have such a discussion with Ashwin?
A) Code of Ethics of Professionalism B) Code of Ethics of Confidentiality
C) Code of Ethics of Fairness D) Code of Ethics of Integrity
Q.4 You advise Ashwin to buy a Rs. 50 Lakh life insurance term plan. While filling the proposal form
for purchase of this term plan Ashwin does not mention details of another Life Insurance policy,
taken by him earlier, from a different insurance company. In case of any mishap, under which
principle the claim of Ashwin could be questioned by the present Insurer, if the facts of his earlier
insurance policy become known?
A) Principle of Insurable Interest B) Principle of Utmost Good Faith
C) Principle of Waiver and Estoppel D) Principle of Indemnity
Q.5 You, being a Financial Planner, would help Ashwin to set his financial goals in .
A) Any term as desired by him B) Both current & future money terms
C) Current money terms D) Future money terms
Q.6 Ashwin has not prepared any WILL as on date. He wants to know that in case he dies intestate as
per prevailing Hindu succession law in India. Which of his existing family members can be denied
a share of his estate in case of a dispute?
A) His Mother B) His Father
C) His wife D) His wife and kids

Q.7 Ashwin plans to pay off his loan after paying 5 more instalments. he took a loan of Rs. 450000 for
4 years at 11.25% p.a. on reducing monthly balance basis on 1st April 2018. The first EMI was paid
on 1st May 2018 and thereafter on every 1st of the month. Prepayment of car loan would attract
a penalty of 4% on the outstanding liability. What amount is required to prepay the loan with
penalty?(Please ignore any other charges and taxes if applicable)
A) Rs.210603 B) Rs.302457
C) Rs.256987 D) Rs.354787
Q.8 Ashwin proposes to invest in an upcoming housing project in suburban Mumbai for a flat worth
Rs. 7,500,000 today. He proposes to make the down payment of Rs. 500,000 immediately. The
balance amount is to be paid in instalments to the builder, 15% of the balance amount on 1st
April 2020, 30% on 1st September 2020, 30% on 1st December 2020 and balance on 1st April
2021. In the meanwhile, he has researched on the various housing loan schemes offered by
banks. He has finalised on one of the Banks that provides the loan at fixed interest of 10.5% p.a.
disbursable as per time schedule agreed with the builder. The tenure of the loan is 15 years from
the date of disbursement of first instalment and he pays the first EMI on 1st May 2020. He wants
to know, what would be final EMI payable after the full disbursement of loan amount?
A) Rs. 84,301 B) Rs. 78,740
C) Rs. 78,682 D) Rs. 77,377
Q.9 Ashwin also wants to know what would be the additional investment yield, over and above risk-
free return i.e. 6% p.a. required for the retirement corpus of Rs. 3.4 crores to sustain till his
proposed post-retirement period while providing her an inflation-linked monthly annuity of Rs.
1.6 lakh.
A) 8.66% p.a. B) 2.16% p.a.
C) 3.19% p.a. D) 0.32% p.a

Solutions
Q1 D) 1.08 crore
(Solution given below)
Current value of the desired house ₹ 1.40 crore
Value of the desired house after 5 years ₹ 19181213 (14000000*1.065^5)
Existing market value of the house ₹ 75 lakhs
Value after 5 years ₹ 10275650 (7500000*1.065^5)
Loan outstanding today ₹ 15.40 lakhs
Balance after 5 years from now
Set = end Amortization
N = 116 (180-64) Set End
I = 8% PM 1 1
PV = 1540000 PM 2 60
Pmt = -19106 Balance? 890514
FV = 0
P/Y = 12
C/Y = 12
Sale proceeds of existing house ₹ 10275650
Less loan outstanding ₹890514
Capital gain tax liability ₹1000000
Balance amount can be utilized ₹ 8385136
Amount needed to buy new house ₹ 10796077 (19181213-8385136)
Q2 A) They must take Mortgage Redemption Insurance or an equivalent term insurance to cover
outstanding loans
Q3 A) ₹ 3782000
Financial Assets Value ₹5599000
PPF 620000

Sovereign Gold Bonds 290000
Equity MF 1187000
Balanced MF 328000
Debt MF 767000
Equity Portfolio 1832000
Term Deposits 350000
Cash at bank 225000
Total liabilities ₹1817000

Home Loan Liability 1540000
Car Loan 277000
Net worth = Assets – Liabilities ₹ 3782000
Q4 C) ₹1.40 crore
Current Expenses(Yearly) ₹ 840000 p.m.
Current Age of Sumedha 31 years
Amount Required 70% of current Expense ₹ 588000 (70% of 840000)
PV Today (31 to 55) ₹ 10909729
N = 24
I = 2.38……. (RRR) (7.5-5)/1.05
PV =? (10909729)
PMT = -588000
FV = 0
P/Y = 1
C/Y =1
Expenses required at the age of 55 ₹ 1896359 (588000*1.05^24)
Amount required from 55 to 82 ₹ 948179 (50% of 1896359)
PV at the age of 55 (55 to 82) ₹ 19172315
N = 27
I = 2.38……. (RRR) (7.5-5)/1.05
PV =? (19172315)
PMT = -948179
FV = 0
P/Y = 1
C/Y =1
PV today ₹ 3379648 (19172315/1.075^24)
Total Amount required Today ₹ 14289377 (10909729+3379648)
Current Insurance cover ₹ 400000
Additional Insurance cover required ₹ 13889377 (14289377-400000)
Q5 D) ₹ 25223
First Child would complete 18 years in (after 14 years) April, 2034
Funds required for First Child till April, 2038
Second Child would complete 18 years in (after 17 years) April, 2037
Funds required for Second Child till April, 2041
Period of investment till March, 2031 (156 Months) 13 years
Amount required in April, 2034 ₹ 2349775 (800000*1.08^14)
Amount required in April, 2037₹ 4070020 (300000+800000)*1.08^17
Amount required in April, 2038 ₹1198806 (300000)*1.08^18
PV of these amounts in April, 2033 ₹8398967 (go to cash function put I = 11%
(In investment yielding 11% p.a. ) Then go to cash editor put 0 in 1 then feed
The above figures respectively
NOTE: we can use RRR and putting non inflated values in cash function. We will get the same NPV
Monthly amount required till March, 2033 (one year prior to April 2033)

Set Begin
N = 156 (13*12)
I = 11%
PV = 0
PMT = -25223
FV = 8398967
P/Y = 12
C/Y = 1
Q6 C) 9%
Current cost of annual vacation ₹ 2 lakh
Cost scalation 8%
Risk free rate 5.5%
Vacation fund requires when due in 26 years ₹ 26275992
N = 16
I = -2.314……% (RRR)
PV =? 26275992
PMT = -1479271 (200000*1.08^26)
FV = 0
P/Y = 1
C/Y = 1
Required value in asset allocation fund before switch to risk free (3 years prior) 22376994
(26275992/1.055^3)
This need to be accumulated by investing ₹3 lakh (increasing by 25% every year) in 6 annual
investment. The return to be obtained in asset allocation fund is calculated by XIRR function in
excel.
1. - 1500000 2. – 300000 3. – 375000 4. 468750
5. –585937 6. –732421 7. –915527 8 to 23. 0
24. + 22376994 IRR 9% (8.62%)

Q7 C) Pratik ₹ 60.7 lakh, 48% shortfall; Aslia ₹76 lakh 49% shortfall
PPF Account Balance as on 31 March 2020 ₹ 620000
Account Initial Maturity 2025
Numbers of Subscription Remaining 7 years
Numbers of subscription from 2027 to 2042 15
Rate of interest throughout 7.75%
Maximum subscription at the end of every financial year (22 years) ₹ 150000
Accumulated balance as on March 2042 (Pratik’s age 26, Aslia age 23) ₹11266928
Set = end
N = 22
I = 7.75%
PV = -620000
PMT = -150000
FV =?( 11266928)
P/Y = 1
C/Y = 1
Accumulated balance as on March 2043 (Pratik age 27) ₹12140115 (11266928*1.0775)
50% of accumulated amount withdrawn for ₹ 6070057.5 (12140115/2)
Pratik marriage expenses
Estimated expenses for Pratik ₹ 11742927(2000000*1.08^23)
Shortfall in Meeting Pratik marriage expenses 48.30%((6070057.5/11742927)-1)
Remaining amount in PPF accumulated till March 2046 ₹7593546 (6070057.5*1.0775^3)
Estimated expenses for Aslia ₹ 14792706 (2000000*1.08^26)
Shortfall in meeting Aslia’s marriage expenses 48.67%
((7593546/14792706)-1)
Q8 D) ₹166680
Income under the head salaries
Basic salary 720000 (60000*12)

D.A 360000 (30000*12)
H.R.A 180000 (15000*12)
Transport allowance 90000
Medical reimbursement 15000
Entertainment allowance 90000 (7500*12)
LESS STANDARD DEDUCTION 16(ia) 50000
Income from salary ₹ 1405000

Income under the head house property
Self-occupied
GAV nil
Less u/s 24 (b) 119223 (Current Home loan outstanding ₹ 1540000, cal.
EMI and Int. payment 1 to 12 installment in the current year)
Refer question no. 1 for EMI calculation
Loss from house property (-119223)

Income from other sources
Saving account interest 500 (exempt upto 10000 u/s 80 TTA)
Interest on fixed deposit 100000 (90000/90 *100)
Income from other sources ₹ 100500
Gross total income ₹1386277

Less deduction u/s 80 (c)
PPF 150000
Deduction u/s 80 (d) 45000 (if parents are not senior citizen then 25000)
Total income ₹ 1191277

0-250000 0% 0
Tax on total income Rs.169883
250001-500000 5% 12500
Add (cess) Rs.6795
500001-1000000 20% 100000
Rs. 176678
More than 10 Lacs 30% 57383
Less TDS -Rs.10000
Tax Payable Rs.166678

Round off Rs.166680
Q9 D) 46.6%
Go to XIRR function of excel
12-Oct-17 -65
8-Dec-18 20
30-Nov-19 30
1-Apr-20 100
XIRR 46.6%
Q10 A) CFP marks are owned outside the US by US based FPSB Ltd
Q11 B) (ii) and (iv)
Q12 C) this is a play on long duration with expected moderate trend in interest rates, thus scheme
return though capital appreciation is expected.
Q13 B) It is very useful as all future premiums would be waived by the Insurance Company in case
the Life assured becomes totally and permanently disabled
Q14 A) ₹1.46 crore; 18.66% curtailment
Current age of Ashwin 34 years
Retirement age 60 years
Life expectancy of Ashwin 80 years
Life expectancy of Sumedha 82 years
Current expenses ₹ 70,000 p.m.
Required annual expenses in the 1st year ₹ 2986765 (840000*1.05^26)
after retirement (age of 60)
PV of expenses required from Ashwin’s age ₹54356541
60 to Sumedha’s life expectancy
Set = Begin
N=25
I = 2.85……% (RRR) (8-5)/1.05 PV =? (-54356541)
PMT = 2986765
FV = 0
P/Y=1, C/Y=1

PV of medical expenses at Ashwin’s retirement to Sumedha’s life expectancy ₹9318264
Set = Begin
N = 25
I = 2.85% (RRR)
PV =?
PMT = -512017 (144000*1.05^26)
FV = 0
P/Y=1, C/Y=1
Initial total corpus required at the Ashwin’s retirement age ₹63674805 (54356541+9318264)
Lower yield: higher inflation: increased longevity
Revised inflation 5.5%
Revised investment yield 6.5%
Retirement corpus to last 85-60 = 25 years
(Ashwin 85 now coincide with Sumedha’s 82)
Revised PV required at the Ashwin’s 60 ₹66831281
(60 to Sumedha’s life expectancy)
Set = Begin
N = 25
I = 0.94…..% (RRR) (6.5-5.5)/1.055 PV =? (-66831281) PMT = 2986765
FV = 0
P/Y=1, C/Y=1
Revised PV of Medical expenses required at the Ashwin’s 60 ₹11456794
(60 to Sumedha’s life expectancy)
Set = Begin
N = 25
I = 0.94…..% (RRR)
PV =? (-11456794) PMT = 512017
FV = 0
P/Y=1, C/Y=1
Revised total corpus required (Solve PV) ₹78288075(66831281+11456794)
Cushion built on retirement corpus ₹14613270 = (78288075-63674805)
Revised corpus to be withdrawn in the 1st year after retirement
₹2845699((2986765+512017) x 63674805/78288075)
Pre-retirement expenses (at the given rate of inflation up to retirement) ₹ 3498782

Curtailment in expenses 18.66% (1-(2845699/3498782))
Q15 B) ₹44850
Present age of Ashwin 34 years
revised corpus needed from the above question ₹78288075
Suppose a total monthly amount of ₹100 is invested in the asset allocation of equity and debt
components cumulatively
Accumulation to meet the retirement corpus
Equity shares portfolio; current balance ₹ 1832000
Accumulation in 20 years (considering 11% p.a.) ₹ 14770155 (1832000*1.11^20)
Accumulation of up to retirement (next 6 years) ₹ 23438379 (14770155*1.08^6)
Balance to be accumulated through asset allocation fund ₹54849696 = (78288075-23438379)
1st five years of asset allocation
Equity return 11%
Debt return 7.50%
Equity investment per month ₹ 70
Debt investment per month ₹ 30
Equity component accumulation in 5 years ₹ 5538
(Begin, N=5*12, I=11, PV=0, PMT=-70, FV=0, P/Y=12, C/Y=1)
Debt accumulation in 5 years ₹ 2175
(Begin, N=5*12, I=7.5, PV=0, PMT=-30, FV=0, P/Y=12, C/Y=1)
Total accumulation after 5 years ₹ 7713 (5538+2175)
Next 15 years = Rebalance assets allocation
Rebalanced Equity component accumulated (40%) ₹ 3085 (40% of 7713)
Rebalance Debt component accumulated (60%) ₹ 4628 (60% of 7713)
Revised equity investment per month ₹ 40
Revised debt investment per month ₹ 60
Equity investment accumulation in total 20 years ₹ 32243

Set = Begin
N = 15*12
I = 11%
PV =-3085
PMT = -40
FV =?
P/Y=12, C/Y=1
Debt investment accumulation in total 20 years ₹ 33254
Set = Begin
N = 15*12
I = 7.5%
PV = -4628
PMT = -60
FV =?
P/Y=12, C/Y=1
Total accumulation in asset allocation (20 years) ₹ 65497 (32243+33254)
Last 6 years; 8% yield retirement fund
Monthly investment (Double) ₹ 200 p.m.
Investment accumulated up to retirement ₹122296
Set = Begin
N = 6*12
I = 8%
PV = -65497
PMT = -200
FV =?
P/Y=12, C/Y=1
Actual monthly investment equivalent to ₹100 ₹44850 ((54849696/122296)*100))

Additional Solutions
Q.1 B) gold ETF is better than buying physical gold

Q.2 A)House covers on reinstates value and goods cover on their market value
Q.3 B) Code of ethics of confidentiality
Q.4 B) Principal of utmost good faith
Q.5 C) Current money terms
Q.6 B) His father
Q.7 A)
Amount of loan including processing fees 450000
EMI 11685
(CMPD;End, N=48, I=11.25, PV=450000,FV=0,P/Y=C/Y=12, PMT=solve(11685))
Outstanding loan 1st September 2020 202503
(AMRT;PM1=1, PM2=29,BAL=solve(202503))
Prepayment penalty (4% of Outstanding balance) 8102
Amount to be paid along with penalty Rs.210603
Q.8 C)
1st instalment 1-Apr-2020 1,050,000 11,607
(CMPD;End, N=15X12, I=10.5, PV=1050000, FV=0, P/Y=C/Y=12, PMT=solve(11607))
2nd instalment 1-Sep-2020 2,100,000 23,489

(CMPD;End, N=15X12-5, I=10.5, PV=2100000, FV=0, P/Y=C/Y=12, PMT=solve(23489))
3rd instalment 1-Dec-2020 2,100,000 23,663

4th instalment 1-Apr-2021 1,750,000 19,923

Final EMI payable = 11607+23489+23663+19923 = Rs.78,682
Q.9 D)
CMPD; Begin, N=20X12, I=solve(1.26%), PV=-34000000, PMT=160000, FV=0, P/Y=12,C/Y=1
Required return = (1+0.0126)*(1+0.05)-1 = 0.06323x100=6.32%
Additional yield over and above risk-free rate = 6.32 – 6 = 0.32%

Case Study – 2 (Gurpreet)
Gurpreet, aged 43 years, having twins Roshan and Geet of age 14 years, is a software engineer in a
company based in Mumbai. His spouse passed away recently. Both his children study in the 8th
Standard. His average monthly household expenses are ₹ 1.40 lakh, which include rent of ₹ 45,000 on
the rented apartment, but exclude car loan EMI and all insurance premiums. He has approached you, a
CFPCM practitioner, for preparing a financial plan for his family. He has shared the following financial
information with you:
Gurpreet’s Assets & Liabilities (As on 31stMarch, 2020)

Assets (₹ Lakh)
Equity MF schemes portfolio : 26.47
Balanced MF schemes portfolio : 9.78
Equity shares portfolios14 : 55.92
Gold Jewelry : 2.17
Gold ETF2 : 3.21
PPF A/c3 : 7.87
Equity linked savings scheme4 : 22.75
Physical Gold (coins/bars) : 11.25
Car : 4.80
Liquid fund scheme : 10.25
Corporate bonds of M/s.XYZ Ltd.5 : 8.50
Bank account – Gurpreet6 : 103.25
Liabilities (₹ Lakh)
Car loan7 : 5.01
Credit Cards : 0.72
Salary Income (Annual) (₹ lakh)
1 Securities at cost Rs.35.62 lakh. Last purchase made in March, 2017.

2 Invested Rs.1.6 lakh on 17th July 2019 in the NFO of Gold ETF.
3 Account maturing on 1st April, 2026.
4 Invested Rs.1,00,000 every year for 6 years from 2008 to 2013.
5 Invested in 5 years bonds is stated at face value, purchased on issue on August, 18, 2016; coupon rate 11% p.a. payable half yearly on 1st
October and 1st April every year.

6 Received Rs.80 lakh towards insurance claim on the life of his deceased wife.
7 Taken in August 2018 at 11% p.a. on reducing balance basis for a term of 4 years

Basic Salary : 30.00
Dearness Allowance : 9.00
HRA : 4.80
Special Allowance : 0.90
Variable Salary (Bonus) : 6.00
Employers’ contribution to PF : 3.60
Other cash outflows (Annual) (₹)
Term Plan Insurance premium : 62,857 (Total Cover ₹ 1.5 crore)
Endowment Insurance premium85 : 1,75,527 (Sum assured ₹ 30 lakh)
Health Insurance Premium : 27,631 (Annual – 2 policies/ Total cover
₹ 20 lakh)
Goals:
You, in consultation with Gurpreet, have crystallized the following financial goals for his family and the
preliminary Roadmap to achieve them:
1. Send both the children to a Boarding School immediately – Outlay ₹ 5.15 lakh per child per annum
– for 4 years – To be met year on year basis by investing a suitable corpus today.
2. Buy a house – within one year – Outlay of ₹ 1.5 crore – Take a loan not exceeding Rs.50 Lakh with
full repayment coinciding with retirement.
3. Send Roshan for Higher Education abroad after he completes boarding education. The estimated
outlay is ₹ 1.50 crore then.
4. To send Geet for a course in fashion technology of 4 years duration after she completes boarding
education. The current cost is Rs.10 lakh per year, escalating at 8%
5. Retirement Corpus – To be accumulated in 17 years – Corpus to sustain inflation adjusted income
equivalent to current Rs.80,000 monthly for 25 years post retirement.
6. Undertake a world cruise Trip with both children on their completing higher
education/professional course. The trip cost in US Dollars 50,000 per person at current exchange
rate of 66.76 INR/USD. Average annual rupee depreciation vis-à-vis USD of 2% and cost escalation
of Trip at 3% p.a. is expected.
7. To accumulate funds for marriage of his children, each marrying sometime after their respective
age of 25. Each marriage costs today Rs. 25 lakh, such costs escalate by 7% p.a.
8. Suitable Estate planning to cover all his physical and financial assets.
Life Parameters
8 Term of 20 years, Purchased on 15th March, 2010.

Gurpreet’s expected life : 85 years

5) Gold & linked investments : 6.00% p.a.
7) Bank/Post Office Term Deposits (> 1 year) : 7.25% p.a.

2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 2 (Gurpreet)
(Reference Date 1st April 2020)
(1) Gurpreet has already equity shares investment and further planning to invest in two companies
ABC & XYZ. The coefficient of correlation between the two stocks is 0.9. The standard deviation of
return for ABC is 14% and standard deviation return for XYZ is 16%. Expected return for ABC is
11% while the XYZ expected return is 13%. Calculate standard deviation of gurpreet portfolio for
which he plans to invest 4 lakh in ABC and 1 lakh in XYZ? [2 Marks]
A) 14.14 B) 12.50
C) 12 D) 12.3
(2) After preparing the financial plan of Gurpreet, you have given following notes to the plan;
1. These recommendations are made for your benefit only.
2. These recommendations are based on the information provided by you on your current
situation; we expect this information to be completed and accurate.
3. Returns on investments will depend on market conditions and policy of fund management
followed by fund managers.
4. The investments planned for you long term in nature; therefore volatilities of short term in
nature should be ignored.
These notes are to your plan. [2 Marks]
A) Disclosures B) Disclaimers
B) Executive summary D) Additions
(3) Gurpreet has endowment policy whose sum assured is ₹ 30 lakh and a term of 15 years. Gurpreet
wants to know what amount he will get on maturity of this policy if simple reversionary bonus of
₹30 per 1000 SA is assumed for 5 years and ₹50 per 1000 SA for balanced term. (Assume the
policy would also give final additional bonus of ₹ 70 per 1000 SA and also calculate return on the
policy? [3 Marks]
A) 7.90% and ₹ 2000000 B) 6.80% and ₹ 3200000
C) 8% and ₹ 5160000 D) 5% and ₹ 3000000
(4) Gurpreet wants to create a trust that would receive a corpus, in case of any eventuality with
Gurpreet’s life and utilize the corpus as follows. A sum of ₹75 lakh towards purchase of house for
the accommodation of both children’s, their current living expenses till his Gurpreet’s retirement

and should cover their educational expenses,8% escalation hence are required inflation adjusted,
when drawn from risk free instruments. Estimate additional life insurance coverage? [4 Marks]
A) ₹4 crore 30 lakh B) ₹4 crore
B) ₹2 crore 91 lakh D) ₹5 crore
(5) You have suggested to set aside 10% of his equity MF portfolio for the purpose of his abroad trip.
In addition, you have advised to start monthly investments today in a ratio of 50%: 50% in
balanced fund and debt fund for seven years. At the beginning of 8th year, new investment
allocation will be in ratio of 30%: 70% and portfolio to be switched to Liquid fund for balance
term. Calculate monthly investment required for 10 years. ( consider current cost of world trip is
Rs.10 lacs ) [5 Marks]
A) Rs.7059 B) Rs.5900
C) Rs.6013 D) Rs.5113
(6) Gurpreet wants to set aside a lump sum fund required today in debt fund for Geet ( higher
education commence from age 18 years) assume that the cost of education is expected to
increase @ 10% p.a. He wants to know how much fund he needs to set aside in debt. [3 Marks]
A) ₹ 4540636 B) ₹4589709
C) ₹5010204 D) ₹4657488
(7) Gurpreet wants to purchase a child life insurance plan from a life insurance company to meet his
kid’s educational needs. He wants to know, if he gets permanent physical disabled due to
accident which would hamper his income pursuits, by what mean can policy be kept in force
without payment of further premium but retaining intended benefits. You advice ?
[2 Marks]
A) Payor rider B) Living benefit rider
C) Survivor purchase option rider D) Dreaded diseases rider
(8) Gurpreet has invested ₹6 lakh in a NFO of a separate fund house mutual fund balanced scheme
on 1st October 2019 at ₹10 per unit with entry load of 2.25% and exit load nil. With SWP of
₹15,000 per month effective from 1st April 2020. From 1stOctober 2019 to 31st January 2020 the
NAV of the scheme grew at an average rate of 2.5% per month, while from 1 stFebruary 2020 till
date, the NAV declined at an average rate of 3.20% per month. Gurpreet wants to know the
tentative value of units outstanding in his Mutual fund scheme account as on 30 April 2021
assuming the decline continue till 30th April 2021. Assuming that the SWP is effective on 1st of
every month. You estimate the same is ? [4 Marks]

A) ₹200500 B) ₹215605
C) ₹241177 D) ₹256666
(9) Calculate the net-worth of Gurpreet considering his financial Assets only? [3 Marks]
A) ₹25000000 B) ₹32500000
C) ₹24227000 D) ₹19867000
(10) Gurpreet wants to invest for his retirement corpus as per goal. In this connection you suggest him
to transfer his bank amount balance (₹3000000) to a suitable liquid fund and also utilize his
current holding in equity MF scheme and balance MF scheme , while investing every month to
the extent of ₹30,000 in equity MF and 20,000 in balanced MF from the liquid fund from today.
After this arrangement is over the money invested would continue to grow to suffer a tax
incident of 4%. He wants to know how long post-retirement this corpus would sustain to give him
a desired annuity, if the same is invested in risk-free instrument ( consider tax on capital gains
applicable for monthly withdrawals from liquid is paid separately by Gurpreet). [5 Marks]
A) 10.14 years B) 8.68 years
C) 21 years D) 9.5 years
(11) Gurpreet wants to create a private trust in the name of his children’s. According to you who of
the following are correct in case of private Trust? [2 Marks]
A) A trustee shall be any known person capable of holding property.
B) A trustee has to be declared non-testamentary instrument in writing, signed and registered
or by the will of author of the trust or of the trustee in case of an immovable property
C) A trustee would be taxed in his hands in a representative capacity where the beneficiary is
minor, lunatic or idiot or specifically entitled to receive income from the trust.
D) The author of the trust can be the trustee himself.
1. (III) and (IV) 2. (II) and (III)
3. (II), (III) and (IV) 4. (I), (III) and (IV)
(12) Gurpreet wants to invest in NSC after 6 months in the name of Roshan and Geet. She wants to
know the taxability of interest accrued and the maturity amount on NSC. (Assume tax provisions
of FY 2020-21 would prevail). [2 Marks]
A) Will not be taxed they as they are minors

B) Would be clubbed with Gurpreet’s income in the year in which interest accrues and would
be Eligible to deduction under section 80C, the maturity amount would be exempt from tax
C) Would be clubbed with Gurpreet’s income in the year in which interest accrues and would
not be eligible for deduction under section 80C, the maturity amount would be exempt
from tax
D) The children would taxed on interest earned at the time of maturity of NSC.
(13) Gurpreet wants to know his tax liability on income from capital gains for the financial year 2018-
19 if he sells his entire listed equity shares, Gold ETF, physical gold coins and gold jewelry. The
Gold coins were gifted to Gurpreet on the occasion of his marriage on 26 March 2005. The cost of
such Gold coins was ₹45250 at the time of purchase i.e. f.y. 2004-05, gold jewelry purchased for
Rs. 250000 on 1 may 2014. (Ignore education cess) [5 Marks]
A) ₹153160 B) ₹ 368340
C) ₹355659 D) ₹373704
(14) Gurpreet had purchased 1000 equity shares of X Ltd., listed in stock exchanges in India and
abroad in April 2014 at the rate of ₹225 per share. Fair market value as on 31 st Jan 2019 was
Rs.390 per share. He intends to transfer today all the shares at a price of ₹450 per share privately
to his brother in an off-market deal. Calculate his capital gains tax liability for AY 2021-22.
[3 Marks]
A) ₹28870 B) ₹28780
C) ₹23175 D) ₹34900
(15) An advisor advised Gurpreet to buy Endowment policy, he wants to know the importance of
waiver of premium rider from you?
A) It is useless as there will not be any amount to be received from the Insurance Company at
the time of maturity of the policy
B) It is very useful as all future premiums would be waived by the Insurance Company in case
theLife Assured becomes totally and permanently disabled
C) It is same as Permanent Disablement rider hence need not be mentioned separately
D) It is inbuilt with all the Term Insurance plans and thus need not be mentioned separately

(1) Gurpreet wants to know relative advantages of having exposure of Gold as an asset class through
Gold ETFs which can be purchased and traded as units through the Demat A/c which of the
following is not appropriate in this context?
A) In Gold ETF, LTCG tax is levied after one year of purchase against 3 years in case of physical
gold.
B) In case of an investor holding physical gold, He has to pay wealth tax after the net worth
crosses a certain limit and no wealth tax if gold ETF units.
C) Most of Gold ETF schemes available in India reflect International prices of Gold and are
insulated from local demand-supply factors.
D) Securities Transaction Tax (STT) is applicable on purchase and sales of Gold ETFs units.
(2) You have noticed that Gurpreet has many cards, you advise him to immediately go for card
protection policy. He wants to know the benefits of this policy:
1) You can block all your cards with a single phone call
2) This is applicable only for financial cards like credit cards, debit cards and ATM cards
3) This applicable for all the cards including driving license, PAN card, etc
4) This helps at the time of reapplying for the cards
A) Only 1 & 2 B) Only 1, 2 & 3
C) Only 2 & 3 D) Only 1
(3) Gurpreet is seriously concerned with the ongoing rising inflation. Taking a bitter experience of his
earlier Equity investments, he is keen to make some investments in debt instruments. Keeping in
view the constantly Rising inflation rate into account, which type of investment, from the given
options, is advisable for Gurpreet in the current scenario?
A) Bank FDR B) Long Term Bonds

C) Short Term Bonds D) Floating Rate Bonds
(4) To fund Roshan’s higher education after 4 years Gurpreet will take a loan of 50 lakhs then. He will
also need to buy a house in USA worth 80 lakhs now escalating @ 2.5% p.a. You advise him to
invest 99 lakhs from his savings account into an instrument yielding 5% over and above the risk
free return and also do a SIP in same instrument. What is the additional SIP he will have to do to
achieve the goal?
(Goal: Send Roshan for Higher Education abroad. The estimated outlay is Rs.1.3 crore then for 5
years) (Assumption: Risk-free Instrument- 6.5%; Inflation – 5.5%)

A) Rs.25306 B) Rs.56980
C) Rs.30987 D) Rs.34567
(5) You advise Gurpreet to save Rs.7000 every month, in Equity, Balanced and Debt funds in the ratio
of 40:40:20. The investment has to be increased every two years by 20%. What would be the total
amount accumulated for Geet’s Marriage after 11 years? (Assumption: Equity – 11%; Balanced -
9%; Debt – 7%; Liquid – 5.5%; Inflation – 5.5%)
A) Rs.2456789 B) Rs.2311339
C) Rs.2567894 D) Rs.3456753
(6) Gurpreet wants to take a trip abroad with his children when he attains 53 years of age. The current
cost of trip is Rs.10 lacs. He wants to accumulate funds for the same through investing monthly SIP
100% Equity for 5 years, beginning of 6th he will rebalance fund as per new asset allocation equity
and debt is 50:50 respectively. Beginning of 9th year, he will redeem the entire corpus and invest
in to risk free instrument for balance years. (Note: the cost of trip escalates at 9%) He wants to
invest in monthly SIP from today for five years only?
A) Rs.20544 B) Rs.34560
C) Rs.25780 D) Rs.56434
(7) Gurpreet wants to set aside lumpsum funds for the boarding school expenses of the both children
from a bank A/C. For this purpose, how much amount should he invest today if he is thinking to
invest in a portfolio of 40% Equity MF and 60% Balanced MF. (Assume that the boarding school
expenses are expected to escalate @ 7.5% p.a.)
A) Rs.3992345 B) Rs.2598762
C) Rs.2098432 D) Rs.2890452

Solutions
Q1 A) 14.14
Portfolio amount = 4+1 lakh 5 lakh
Weightage of ABC 0.80
Weightage of XYZ 0.20
Calculation of the portfolio variance
= 0.80^ (2)*14^ (2) +0.20^ (2)*16^ (2) +2*0.80*0.20*0.90*14*16 = 200.192
Standard deviation of portfolio √200.192 = 14.14
Q2 B) Disclaimers
Q3 C) 8% and ₹5160000
Sum assured ₹30 lakh
Rev. Bonus for 1st 5 years ₹450000 (30/1000*3000000*5)
Rev. Bonus for the last 10 years ₹1500000 (50/1000*3000000*10)
Additional bonus = 70/1000*3000000 ₹210000
Maturity Amount ₹5160000
Calculating return
N = 15
I =? (8%)
PV = 0
PMT = -175527
FV = 5160000
P/y = C/y = 1
Q4 C) ₹2 crore 91 lakh
Present annual Expenses (140000-45000)*12 = 1140000
Risk free rate 5.5%
Escalation rate 5%
Present Value of Annual living expenses from age of 43 to 60 ₹18665646
N = 17
I = 0.476……. % (5.5-5)/1.05
PV =?
PMT = -1680000
FV = 0
P/y=1, C/y = 1
Present value of boarding school ₹4268773
(Inflate expenses for each year @ 8% & then discount it by 5.5%)
N=4
I = -2.314……. % (5.5-8)/1.08
PV =?
PMT = 1030000
FV = 0
P/y=1, C/y = 1
Present Value of Roshan Higher Education ₹12108251 (15000000/1.055^4)
Present value of Geet higher education ₹ 4551463 ₹(5638464/1.055^4)

N=4
I = -2.314……. % (5.5-8)/1.08
PV =? (-4144440)
PMT = 1360489(1000000 x 1.08^4)
FV = 0
P/y=1, C/y = 1
Present value of House to accommodate ₹7500000
Total value of All PV 47094133
(7500000+18665646+4268773+12108251+4551463)
Term insurance cover ₹15000000
Endowment cover ₹3000000

Total cover ₹18000000
Additional cover required ₹29094133 (47094133-18000000)
Q5 D)
Current cost 1000000
Inflation 5.00%
FV value of goal after 10 years Rs. 16,28,894.63
Equity MF portfolio today 2647000
10% of portfolio 264700
FV of equity portfolio after 10 years Rs. 7,51,594.74
Shortfall = 1628894.63-751594.74 = Rs. 8,77,299.89
Let us assume Rs.100 p.m. will be invested in balance fund and debt fund in the ratio 50:50
FV of balance fund investment after 7 year Rs. 5785.83
(CMPD;N=7x12, I=9, PV=0, PMT=-50,P/Y=12, C/Y=1, FV=solve)
FV of debt fund investment after 7 year = Rs.5387.26
Total FV after 7 year = 5785.83+5387.83 = 11173.09
FV after 3 more years(Liquid fund) = 13119.90
According to new ratio Rs.100 will be invested in balance fund & debt fund (30:70)
FV of balance fund investment after 3 year = Rs.1236.89
FV of debt fund investment after 3 year = Rs.2801.85
Total FV after 3 years = 1236.89+2801.85 = 4038.74
FV after 10 years = 13119.90+4038.74 = 17158.64
SIP required = (877299.89x100)/17158.64 = Rs.5113 p.m.
Q6 A) ₹4540636
Geet higher education
Debt return = 7.5%
I = (7.5-10)/1.10
Go to Cash editor insert
1 to 4 = 0
5 = 1000000
6 = 1000000
7 = 1000000
8 =1000000
Calculate NPV = ₹4540636is the answer
Q7 A) Payor rider
Q8 C) ₹241177
Original investment on 1st October 2019 ₹6 lakh
NAV = 10
Purchase price ₹10.225 (10*1.0225)
Units allotted 58679.7066 (6, 00,000/10.225)
SWP started 1st April 2020 ₹15, 000 per month
NAV grew from 1st October 2019 to 31st January 2020 2.5%
Estimated NAV as on 31st January 2020 11.038 (10*1.025^4)
NAV declined from 01 February 2020 to 31st march 2020 -3.20%
Estimated NAV as on 31st march 2020 11.038.3429*((1-0.0320)^ (2))
Date Estimated Amount Units Outstanding units

NAV SWP redeemed
1st April 2020 10.3429 15,000 1450.270 57229.4366
1st may 2020 10.0119 15,000 1498.217 55731.2196
1st June 2020 9.6915 15,000 1547.748 54183.4716
1st July 2020 9.3813 15,000 1598.925 52584.5466
1stAug 2020 9.0810 15,000 1651.800 50932.7466
1st Sep 2020 8.7904 15,000 1706.406 49226.34
1st Oct 2020 8.5091 15,000 1762.818 47463.522
1st Nov 2020 8.2368 15,000 1821.095 45642.427
1st Dec 2020 7.9732 15,000 1881.302 43761.125
1st Jan 2021 7.7180 15,000 1943.508 41817.617
1st Feb 2021 7.4710 15,000 2007.76 39809.857
1st March 2021 7.2319 15,000 2074.143 37735.714
1st April 2021 7.000 15,000 2142.857 35592.857

30thApril 2021 6.776 35592.857
Estimated value on 31st April 2021 (6.776x35592.857) = ₹241177

Q9 C) ₹ 24227000
ASSETS
Equity MF 26.47 lakh
Balanced MF 9.78 lakh
Equity Shares 55.92 lakh
Gold ETF 3.21 lakh
PPF A/C 7.87 lakh
ELSS 22.75 lakh
Liquid Fund 10.25 lakh
Corporate Bond 8.50 lakh
Bank account 103.25 lakh
Total Value of Assets ₹24800000
LIABILITIES
Credit cards 0.72 lakh
Car loan 5.01 lakh
Total Value of Liabilities ₹573000
Net worth = Assets – liabilities ₹24227000
Q10 B) 8.68 years

If ₹50, 000 are drawn every month with immediate effect from this account,
The number of months this arrangement will sustain 70.72 or 71 months
Set = begin
N =? (70.72)
I=6
PV = -3000,000
PMT = 50,000
FV= 0

P/y=12, C/y=1
Return on equity 11%
Return on balanced fund 9.5%
Market value of equity and balance fund (26.47 lakhs, 9.78 lakhs)
Market value at the end of the month till this arrangement last
Equity fund = ₹7867659 balanced fund = ₹3560004
Begin Begin
N = 71 N = 71
I = 11 I = 9.5
PV = -2647000 PV = -978000
PMT = -30,000 PMT = -20,000
FV =? FV =?
P/y=12, C/y=1 P/y=12, C/y=1
Balanced period till retirement = 17*12-71 133 months
Market value of investment till retirement
Equity MF = 25013543 balanced MF= 9733978
Set = begin Set = Begin
N = 133/12 N = 133/12
I = 11 I = 9.5
PV = -7867659 PV= -3560004
PMT = 0 PMT = 0
FV =? FV=?
P/y=1, C/y=1 P/y=1, C/y=1
Total corpus = 25013543 + 9733978 ₹34747521
Net corpus post tax = 34747521*(1-4%) ₹33357620
Risk free rate 5.5%
Inflation 5%
Real rate of return = 0.5/1.05 0.4761…..%
Current HHE = Rs.80000 pm

HHE at retirement = 80000*1.05^17 = 183361
Set = begin
N =?= 188.768
I = 0.4761…..%
PV = -33357620
PMT = 183361
FV = 0
P/y=12, C/y=1
Corpus can be withdrawn for 188.768/12 = 15.73 years.
Q11 (II), (III) and (IV)
Q12 C) would be clubbed with Gurpreet’s income in the year in which interest accrues and would
not be eligible for deduction under section 80C, the maturity amount would be exempt from
tax.
Q13 D)373704
1) Equity shares
Sales Consideration 5592000
Less cost of acquisition 3562000
Long term capital gain 2030000
2) Gold ETF
Less indexed cost of acquisition 325405.40(160000 * 301/148)
Long term capital loss (-4405.4)
3) Gold coins
Less indexed cost of acquisition 120533 (45250 *301/113)
Long term capital gain 1004466.8
4) Gold Jewelry

Less indexed cost of acquisition 313541.6 (250000 *301/240)
Long term capital loss (-96541.6)
Net long term capital Gain other than equity shares (1004466-96541-4405) 903520
Tax on 903520@ 20% = 180704
Tax on equity shares 2030000-100000=1930000@10% 193000
TOTAL TAX =180704+193000 = 373704
Q14 D) ₹32120
Option - 1
Sales Consideration 450000 (1000*450)
Less indexed cost of acquisition 282187 (225000*301/240)
Long term capital gain 167812.5
Tax @ 20 % 33563
Add education cess 1342
Tax liability from capital gains 34905
Round off 34900
Option - 2
Sales consideration 450000 (1000*450)
(Less) cost of acquisition 225000 (1000*225)
Long term capital gain 225000
Tax @ 10 % without indexation 22500
Add education cess 900
Tax liability from capital gains 23400
Q15. B) It is very useful as all future premiums would be waived by the Insurance Company in case
the Life Assured becomes totally and permanently disabled.

Additional Solutions
Q.1 D)
Q.2 D)
Q.3 D)
Q.4 A)
No. of years for goal 4
Loan for Education 5000000
Cost of house today 8000000
After 4 years value of house 8830503
(CMPD;N=4, I=2.5, PV=-8000000, PMT=0, FV=solve(8830503))
Total amount required after 4 years 16830503(8830503+5000000)
PV of saving account balance 9900000
SIP required ₹ 25306
(CMPD;N=4x12, I=11.5, PV=-9900000,PMT=solve, FV=16830503,P/Y=12,C/Y=1)
Q.5 B)
Time frame for Geet's Marriage is 11 years. So investment period will also be of 11 years
Increase in SIP Amount after every 2 years
Ratio 40 40 20 SIP amount
No of yrs Equity Balanced Debt
11% 9% 7%
2 2800 2800 1400 7000
FV after 2 yrs 75,053 73,602 36,081
2 3360 3360 1680 8400
FV after 4 yrs 1,82,536 1,75,770 84,606
2 4032 4032 2016 10080
FV after 6 yrs 3,32,979 3,14,819 1,48,822
2 4838.4 4838.4 2419.2 12096
FV after 8 yrs 5,39,955 5,01,222 2,32,735
2 5806.08 5806.08 2903.04 14515.2
FV after 10 yrs 8,20,908 7,48,124 3,41,275
1 6967.296 6967.296 3483.648 17418.24
FV after 11 yrs 9,99,717 9,03,084 4,08,537

Total accumulation for her marriage Rs.2311339
Q.6 A)
Current cost of trip Rs. 10,00,000
Future value of abroad trip after 10 years Rs. 23,67,364
Let us assume that initial SIP investment Rs.100 p.m.
FV after 5 years Rs.7911.55
For 6 to 8 years portfolio rebalance Equity(50%) Debt(50%)
Rs.3955.78 Rs.3955.78
Future value after 2 years Rs.5410 Rs.4846
Total accumulated fund Rs.10256
FV after 9th and 10th year(risk free) Rs.11524
Monthly SIP amount (2267364x100)/11524 = 20543
Q.7 A)
Weighted average return = (11*0.4)+(9*0.6)= 9.8%
FV of Exp. PV of exp(9.8%)
1030000(1st yr) 1030000
1107250(2nd Yr) 1008424
1279566(3rd Yr) 987301
1589601(4th Yr) 966620
Total Amount required today = 1030000+1008424+987301+966620 = Rs.3992345

Case Study – 3 (Sahanbhuti)
Ms. Sahanubhuti, aged 34 years, is working in Mumbai. She is the sole guardian of her only daughter
Shambhavi, aged 12 years, pursuant to the death of her husband Manohar, who died intestate, had no
siblings and whose parents had predeceased. She is currently residing in a rented house. Her daughter
is studying in the 6th Standard. She has approached you, a CFP CM practitioner, for preparing her
Financial Plan. She has shared the following financial information with you:
Salary Income (2020-2021) : Annual (₹ lakh)

HRA : 7.20
Conveyance Allowance : 3.00
Special pay : 8.98
Variable Salary : 8.00
Employee’s Provident Fund : 1.44
Employer’s Provident Fund : 1.44
Regular Outgoings Monthly (₹)
Basic Household Expenses : 40,000
Services availed : 12,500
School Fees : 12,500
House Rent : 35,000
Power, Telecom & Fuel : 12,500
Car Loan EMI : 25,585
Other Monthly & Annual cash outflows
SIP – Equity Mutual Fund (Index Fund) : 15,000 (Monthly)
SIP – Balanced Mutual Fund : 10,000 (Monthly)
Life Insurance Premium16 : 54,324
Health Insurance Premium2 : 27,631
Assets Market Value (₹ lakh) as on 31st March, 2020
1 (Annual – 2 policies/Total Cover Rs.55 lakh)

2 (Annual – 2 policies/Total Cover Rs.20 lakh)

Equity Mutual Fund portfolio : 32.45
Balanced MF scheme investment : 12.79
Debt MF portfolio : 5.98
Demat Account - Shares : 21.92
Provident Fund : 9.93
Public Provident Fund (PPF) A/c.3 : 6.59
Gold & Diamond Jewellery : 15.75
Car4 : 7.50
Bank (Salary Account) : 2.82
Savings Bank account – Sahanubhuti5 : 33.26
Deposit with House Owner : 3.00
Money Back Insurance Plan6 : 5.00
Liabilities (₹ lakh) As on 31st March, 2020
Car loan : 7.99
You, in consultation with Sahanubhuti, have identified the following financial goals for her family
and the preliminary Roadmap to achieve them:
1. Send her daughter to a Boarding School – Immediately – Outlay ₹ 2.40 lakh p.a. (present cost) –
for 6 years – To be met on year to year basis – education costs are escalating at 10% p.a.
2. Buy a house – Outlay of ₹ 1.20 crore – Look for a ready-to-occupy house immediately by availing
a loan at 60% of value of house.
3. Invest suitably for the Higher Education of Shambhavi – for 5 years - higher education starts after
6 years – present cost ₹ 8 lakh p.a. – such costs are escalating at 10% p.a.
4. To invest monthly for Shambhavi’s wedding when she completes 25 years of age. The estimated
present cost of marriage is ₹ 25 lakh, and cost escalation for marriage is 7% p.a.
5. Retirement Corpus at age 60 years – Corpus to sustain an inflation linked income stream for a
post-retirement life of 25 years.
6. A World Tour – after 11 years – Outlay of ₹ 12 lakh at current prices, cost escalation of 8% p.a. is
expected.
7. A suitable Estate Planning to cover all her physical and financial assets.

3
Account matures on 1st April, 2026
4
Car purchased out of a loan availed of Rs. 14 lakh on 1st March 2017, interest being charged on
reducing monthly balance for a term of 6 years.
5
Includes Rs. 20 lakh received towards life insurance claim of Manohar.
6
Sum Assured of Rs. 5 lakh, Term of 15 years, Annual Premium of Rs. 45,565, Purchased on 18th
September, 2015, terms of money back: 15% of SA at the end of 3rd/6th/9th & 12th year and 40% at
maturity
5) Gold & Linked Investments : 6.00% p.a.


2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 3 (Sahanubhuti)
(Reference Date 1st April 2020)
(1) Sahanubhuti wants your advice to disclose her professional Income 50% less than the actual to
reduce her tax liability in the current year. You advice not to conceal particulars of her Income or
furnish an inaccurate particulars of such income, as Penalty payable in addition to tax under
section 271(1)c of Income Tax Act is payable. [2 Marks]
A) At the discretion of Commissioner of Income tax
B) Minimum 200% of the tax sought to be evaded and maximum 300% of the tax sought to be
evaded
C) Minimum 100% of the Income sought to be evaded and maximum 300% of the Income
sought to be evaded
D) Minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to be
evaded.
(2) Sahanubhuti, in an official conference met a CFP CM Practitioner who was one of his old friends.
Both of them were discussing about their professions and businesses and during the talks
Sahanubhuti asked for some recommendation on his personal finances from his CFP CM friend. He
suggested Sahanubhuti to come to his office and he will provide the recommendations in writing.
Sahanubhuti asked, is it important to have it in writing? You as a CFP CM Practitioner explained
that all recommendations concerning the financial affairs of a client should be presented in
writing because: [2 Marks]
1) It is regarded as best practice under the FPSB India code of ethics and rules of professional
conduct.
2) It provides substantial protection to the planner under common laws against any claims
arising Thereof.
3) It will not attract the law of contract to determine the civil rights of both the parties.
4) It gives the client the necessary time to fully consider the planner’s recommendations.
A) 1, 2 and 4 only B) 2, 3 and 4 only
C) 1 and 4 only D) 1, 2, and 3 only

(3) Sahanubhuti has taken housing loan of ₹50 lakh at fixed rate of interest of 10.5% p.a. The Bank
would release loan installments as per the schedule finalized with the Builder. The tenure of loan
is 25 years from the date of disbursement of first installment and EMI/revised EMI would be
payable a month after the respective release of loan installments. The EMI changes at every stage
of the release of installments as if the outstanding loan amount is repayable over the remaining
tenure. Sahanubhuti wants to know what would be the EMI payable after the full disbursement
of loan amount. She has to pay 20% of the remaining amount on 1st October, 2020and another
20% six months thereafter. The 3rd installment of 30% shall be due on 1st January, 2021 and the
final 30% one year thereafter, pursuant to which the possession would be obtained.(5 marks)
A) ₹ 55987 B) ₹ 65392
C) ₹ 33500 D) ₹ 47710
(4) The higher education costs per annum are ₹8 lakh at present cost. She starts accumulating funds
immediately in a systematic manner every month in an Equity MF scheme. She would switch
equivalent funds required for a particular year to debt MF scheme one year in advance. The funds
would continue to be accumulated for a period up to the last switch to debt fund. What should
be the SIP amount in the equity growth fund? [3 Marks]
A) ₹ 59030 B) ₹ 63900
C) ₹ 54621 D) ₹ 15000
(5) Sahanubhuti wants to buy her residential house, as she has received a fabulous offer for a home
loan. According to you, which types of insurance she should buy to cover that risk. [2 Marks]
A) Life Insurance and disability Insurance
B) Disability Insurance and Accidental Insurance
C) Householder’s Policy and Home loan Protection plan
D) Health Insurance and Life Insurance
(6) While entering into a relationship with you, Sahanubhuti assumed that you being a CERTIFIED
FINANCIALPLANNERCM practitioner, you are fully able to take care of the execution of all aspects
of his Financial Plan, i.e. Taxation, Insurance, Investments, etc. As per FPSB India Code of Ethics,
what is the best proposition in this context? [2 Marks]
A) This is the right assumption which can be made about all CERTIFIED FINANCIAL PLANNERCM
Professionals.

B) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNER CM
Practitioner needs to be disclosed in the beginning, specifically in writing, by the
Professional to the client.
C) A CERTIFIED FINANCIAL PLANNERCM practitioner can never take care of all aspects of a
Financial Plan.
D) A CERTIFIED FINANCIAL PLANNERCM practitioner is concerned with only making a Financial
Plan and not its execution.
(7) Your client sahanubhuti now requires at his retirement age of 60 years a corpus to sustain an
annuity of ₹ 60, 000 p.m.(current cost) inflation linked for a post retirement life 25 years up to
which she expects to live. You estimated that her goal would be achieved by investing corpus at a
return of 8%. Your client apprises you that she would additionally like to start a trust with a
donation of ₹1 crore (value then) on his reaching age of 70 years and would bequeath
posthumously a further amount of ₹1 crore (value then) for her daughter. She asks you whether
this arrangement would be feasible by taking a little more risk while investing the retirement
corpus. You estimate by taking 1% additional return than envisaged and opine that shortfall is
bequeathing to daughter will be ? (Take Rate of inflation 5.5%) [5 Marks]
A) ₹ 11300 B) ₹ 9320
C) ₹769834 D) ₹ 10600
(8) Sahanubhuti expect to accumulate ₹1crore towards retirement fund. A financial firm advised her
to purchase an annuity for a total term of 20 years starting from the retirement, a fixed monthly
amount for the initial 10 years and a provision to double the monthly amount in the second 10
year period. If the minimum yield guaranteed in the annuity is 8% p.a. what monthly amount he
is expected to receive in the subsequent 10 year period? [4 Marks]
A) 111000 B) 129500
C) 119050 D) 123640
(9) Sahanubhuti has a money back policy of sum assured of ₹ 5 lakh for 15 years term and annual
premium is ₹ 45,565. In this policy, he will get a 15% survival benefit at the end of 3rd /
6th/9th/12th year of the policy and 40% at maturity along with simple reversionary bonus of ₹ 40
per thousand plus a terminal bonus of 10% of the sum assured. She wants to know the
underlying IRR in the policy if standalone term insurance for ₹ 5 lakh is available at an Annual
premium of ₹ 1322 for her. According to you it is per annum? [3 Marks]

A) 4.8128% B) 4.7223%
C) 5.9191% D) 6.0120%
(10) You advice your client Sahanubhuti to accumulate corpus for world tour. The client already has in
Debt MF scheme ₹ 5.98 lakh which you advice to extent to achieve her goal. You advise her to
start SIP of ₹ 2000 per month in same fund till her age of 38 years, thereafter increase the same
to ₹ 3000 per month till her age of 42. You advise her to switch 25% of outstanding debt fund
every year to liquid scheme at end of the age 43 until full redemption at the age of 45. How much
she would be able to accumulate? [5 Marks]
A) ₹1701867 B) ₹1542300
C) ₹1789050 D) ₹1690200
(11) Sahanubhuti earning 45 lakh and the anticipated increase in the net income contribution to his
family is expected to increase by 5% p.a. in her service tenure. Such contribution considers
income tax payable in the current year of ₹10.50 lakh and self-consumption of 45% of post-tax
income. Considering investment yield of 9% p.a. you calculate the insurance cover to replace his
net income contribution to the family for the remaining years of his employment. Currently she
has 2 term policies of total cover ₹55 lakh and money back insurance plan of ₹5 lakh. Retirement
age is 60.You find she need additional insurance cover of approximately ?[3 Marks]
A) ₹26146322 B) ₹25888910
C) ₹35678100 D) ₹15060500
(12) During the financial discussions with Sahanubhuti, you asked her about his income. But
sahanubhuti was bit of hesitant in telling his income details to you. Sahanubhuti wants to know
the relevance of income in analyzing her insurance requirement. You explained her that her
income would be used to determine: [2 Marks]
A) The amount of income protection cover required.
B) The amount of income premium loading and/or any exclusion applicable to the policy
C) What level of income would be required for dependents in the event of premature death?
D) What level of income would be required in the event of disability?
1). A and B 2). B and D
3). A, C and D 4). A, B and D

(13) Sahanubhuti purchased 2,000 equity shares of face value ₹10 each on 10th June 2020 in ABC ltd at
₹60. The company declared 50% dividend with record date being 3 rd august 2020. On 20th
October 2020, she transferred 1200 shares out of these 2000 share, at 47 per share. She
transferred balance 800 shares on 20th December 2020 at ₹25 per share. During FY 2019-20
Sahanubhuti also generated long term capital gain of ₹79, 000 on sale of gold. Determine her
capital gain for AY 2020-21? [5 Marks]
A) LTCG ₹41400 B) LTCG ₹35620
C) STCG ₹41400 D) STCG ₹45000
(14) Sahanubhuti wants to sell her gold jewelry at current market valuation. Out of such sell she wants
to reserve ₹5 lakh for paying new house down payment and remaining for her daughter. This
jewelry was bought by her at the price of ₹3 lakh on the 5th June 2014. Sahanubhuti wants to
know whether any capital gains tax liability would arise on such sell. [3 Marks]
A) ₹145680 B) ₹163640
C) ₹146000 D) ₹142550
(15) Sahanubhuti wants to know which option is better to invest

Option1> investment in bank of Rs.2 lacs for 3 years, rate of interest is 10% p.a.
Option2 > investment in FMP of mutual fund of Rs.2 lacs for 3 years, rate of interest is 10% p.a.
A) Option 1 B) Option 2
C) Both are same D) None of the above

1. If Sahanubhuti dies today what insurance she needs to have if she wants that Shambhavi should
get 50% of monthly expenses till her marriage and also her boarding school expenses plus her
marriage expenses in today’s term. Assume that the claim proceeds are invested in a Debt Fund.
A) Rs.6599051 B) Rs.5984756
C) Rs.4527698 D) Rs.6721400
2. In addition to her retirement corpus as per her goal, Sahanubhuti would also like to provide for
Rs.10 lakhs (current cost) for charity at her age of 70 years, another Rs. 10 lakhs (Current cost) at
the age of 80 years and posthumously another Rs. 20 Lakhs at then cost. Calculate the revised
corpus needed. Post retirement investments are done in debt instruments?
A) Rs.65424577 B) Rs.37995826
C) Rs.87987605 D) Rs.29442666
3. To build a Retirement corpus, Sahanubhuti wants to invest 1.5 % excess of Risk free return during
post retirement. She will use existing equity mutual fund for retirement corpus. She wants to
start SIP immediately as per below asset allocation 80% in Equity mutual fund and 20% in Debt
mutual fund for 10 years, Beginning of 11thyear, She will rebalance fund as per new asset
allocation 60% Equity and 40% Debt for another 10 years. After next five year again she
rebalances and asset allocation will be 40% equity and 60% Debt. She will transfer the entire
corpus into liquid fund for balance years till retirement. She wants to know SIP amount required
till retirement? She expects 2% P.A. Increase in her life style expenses till retirement.
A) Rs.3545 B) Rs.4000
C) Rs.5736 D) Rs.7865
4. Sahanubhuti’s father during the financial year 2020-21 has paid medical insurance premium of Rs.
20,000on his health and on the health of his wife. Further, he has also paid Rs. 20,000 to keep in
force an insurance policy on the health of his parents, who are Senior Citizens. The eligible
deduction under section 80D for her father would be .
A) Rs. 40,000 B) Rs. 45,000
C) Rs. 30,000 D) Rs. 20,000

5. Sahanubhuti wants to invest systematically every month in an Equity Mutual Fund scheme with
immediate effect for 11 years, so as to create a corpus for her proposed foreign trip after 11
years from now. Such corpus is withdrawn and reinvested in a Balanced Mutual Fund scheme.
She proposes to contribute 40% of the expenses from her regular savings for her first trip, while
drawing the balance from the corpus. She asks you to calculate the amount of monthly
investment required to achieve that goal.
A) ₹4504 B) ₹5678
C) ₹5675 D) ₹6756

Solutions
Q1 D) Minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to be
evaded.
Q2 A) 1, 2 and 4 only
Q3 D) ₹ 47710
Loan amount 50 lakh
Release of 1st installment on 1st October 2020
20% of 50, 00,000 10, 00,000
Term outstanding 25*12
Release of 2nd installment on 01/04/2021
20% of 50, 00,000 10, 00,000
Term outstanding = 300-6 294
Release of 3rd installment on 01/01/2022
30% of 50, 00,000 15, 00,000
Release of last installment on 01/01/2023
30% of 50, 00,000 15, 00,000
Tenure of the loan is 25 years from 01/10/2020
=release of 1st installment on 01/10/2020 10, 00,000
Term outstanding = 300 months
Rate of interest = 10.5%
EMI from 01/11/2020 to 01/04/2021 9441
Set = End
N = 300
I = 10.50%
PV = -1000000

PMT =?
FV = 0
P/Y=C/Y=12
Release of 2nd installment on 01/04/2021 10 lakh
Principal outstanding of earlier installment = 995757 (AMRT;PM1=1,PM2=6, solve balance)
Total loan outstanding = 995757+10,00,000 19,95757
Term outstanding (Months) 294
Rate of interest 10.50%
EMI from 01/05/2021 to 01/01/2022 18923
Set = End
N = 294
I =10.50%
PV = -1995757
PMT =?
FV = 0
P/Y = C/Y=12
=Release of 3rd installment on 01/01/2022 to 15 lakh
Principal outstanding of earlier installment 1982138
(AMRT-PM1=1, PM2=9, solve balance)
Total loan outstanding 15,00,000+19,82,138 34,82,138
Term outstanding 285
EMI from 01/02/2022 to 01/01/2023 33244
Set = End
N = 285
I = 10.50%
PV = -3482138
PMT = 33244
FV = 0
P/Y = C/Y=12
=Release of last installment on 01/01/2023 15 lakh
Principal outstanding earlier 3447175
(AMRT-PM1=1,PM2=12,solve balance)
Total loan outstanding = 3447175+1500000 4947175
Term outstanding 273 months
EMI from 01/02/2023 to 01/10/2045 47710
(End, N=273, I=10.50%, PV=-4947175, PMT=47710, FV=0, P/y=12, c/y=12)
Q4 C) ₹54621
As the funds for higher education are required for consecutive years after 6 years and the
requisite funds for a particular year are transferred one year prior in the debt fund, the funds
transferred from equity fund to debt fund would be 5,6,7,8 and 9years from the now. Thus
accumulation in the equity would be for 9 years i.e. up to last switch.
=₹ 8 lakh required after 6 years at 8% cost escalation 1417249 = (800000*(1+10%)^6)
Amount transferred to debt fund from equity fund a year prior, i.e. year 5= ₹ 1318371 =
(1417249/1.075)
PV of such fund now if accumulated in an equity fund 782389 (1318371/1+11%^5)
=₹ 8 lakh required after 7 years at 8% of cost escalation 1558974
(800000*(1+10%)^7)
Amount transferred from to debt fund from equity fund a year prior, i.e. year 6 = ₹1450208
(1558974/1.075)
=₹ 8 lakh required after 8 years at 8% cost escalation 1714871 (800000*(1+10%)^8)
Amount transferred to debt fund from equity fund a year prior, i.e. year 7 = ₹1595229
(1714871/1.075)
PV of such fund if accumulated in an equity fund 768335 (1595229/1+11%^7)
=₹ 8 lakh required after 9 years at 8% cost escalation 1886358 (800000*(1+10%)^9)
(1886358/1.075)

=₹ 8 lakh required after 10 years at 8% cost escalation 2074994
(2074994/1.075)
PV of total funds required to be accumulated 3842071
(782389 +775340+768335+761433+754574)
SIP for 9 years to accumulate this amount= 54621
Set = begin
N = 9*12
I =11
PV = -3842071
PMT =? (54621)
PV= 0
P/y=12, C/y=1
Q5 C) Householder’s Policy and Home loan Protection plan

Q6 B) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNERCM
practitioner needs to be disclosed in the beginning, specifically in writing, by the professional to
the client.
Q7 C) ₹769834
Expense required after retirement, inflation-linked 60, 000 P.m.
Rate of return 8%
Inflation 5.5%
Real rate of return 2.3697%
Current age of Sahanubhuti 34 years
Life expectancy 85 years
Expense in the 1st month after retirement 241388 (60000*1+5.5%^26)
Retirement corpus to be accumulated 54866067
(Begin, N=25*12, I=2.3697, PV=? (54866067), PMT=241388, FV=0, P/y=12, C/y=1)

Additional 1% return targeted at 9%
Revised RRR 3.3175%
Revised corpus needed for expense 49571557
(Begin, N=300, I=3.3175, PV=? PMT=241388, FV=0, P/y=12, C/y=1)
Additional corpus each provisioned 10000000
Additional corpus for ₹ 1 crore at 70 years 4224108
(10000000/ (1+9%) ^10)
Additional corpus of ₹ 1 crore at 85 years 1159678
(10000000/ (1+9%) ^25)
Revised corpus needed to meet goals 54955343
(49571557+4224108+1159678)
Additional funds required at retirement to fund 89276
post retirement goals (54955343-54866067)
Alternatively if the funds are not arranged the shortfall 769834
expected in bequeathing to her daughter would be (89276*(1+9%) ^25)
Q8 D) ₹123640
Amount of Retirement fund accumulated for annuity 10000000
Total term 20 years
Yield minimum expected from annuity 8%
Suppose the monthly annuity begin with 100
PV of the amount at the age 60 (60-70) 8397
Set = Begin
N = 10*12
I = 8%
PV =?
PMT = -100
FV = 0
P/Y=12, C/Y=1
Monthly annuity Double in the subsequent 10-year annuity
PV of amount at the age 70 (70-80) 16794
N = 10*12

I = 8%
PV =? 16793
PMT = -200
FV = 0
P/Y=12, C/Y=1
PV of the amount at the age of 60 7779 (16794/1.08^10)
Total amount required at the age of 60 16176 (8397+7779)
Amount of monthly annuity in the initial period 61820 (100*10000000/16176)
Therefore, amount in the subsequent 10-year period 123640 (61820*2)
Q9 B) 4.722%
(Solution Given Below)
Annual premium ₹ 45565
Sum assured ₹5 lakh
Term 15 years
Term premium ₹ 1322
Survival benefits after 3years/6 years/9 years/12 years = 15% of sum assured = 75000
Annual effective investment = 45565-1322 ₹ 44243
Maturity amount = 40% of S.A + reversionary bonus (40/1000*500000*15) + terminal bonus
(10% of 500000) = 200000+300000+50000 ₹ 550000
To calculate the IRR, we use “CASH” function
1 = -44243
2 = -44243
3 = -44243
4 = 30757(75000-44243)
5 = -44243
6 = -44243
7 = 30757(75000-44243)
8 = -44243
9 = -44243
10 = 30757(75000-44243)
11 = -44243

12 = -44243
13 = 30757(75000-44243)
14 = -44243
15 = -44243
16 = 550000
Solve IRR = 4.722%
Q10 A) ₹1701867
Current amount of world tour ₹ 12 lakh
Cost escalation 8%
Inflated amount after 11 years ₹ 2797967 (1200000*1.08^11)
Amount outstanding as on 01/04/2020
Debt fund ₹ 5.98 lakh
Rate of return on debt MF 7.5%
Liquid MF 6%
Balance at age 38 ₹ 910274
(Begin, N=4*12, I=7.5%, PV=-598000, PMT=-2000, FV=? , P/y=12,C/y=1)
Balance at age 42 ₹ 1383137
(Begin, N=4*12, I=7.5%, PV=-910274, PMT=-3000, FV=?, P/y=12,C/y=1)
Balance at age 43 ₹ 1486872 (1383137*1.075)
One fourth is redeemed and invested in liquid scheme at this stage, i.e. at 43 years
=Balance at age 44 years in liquid scheme ₹394021 (371718*1.06)
Balance at age 44 in debt fund scheme ₹1198791
(1486872*3/4)*(1+7.5%)
=Balance at age 45 years in liquid scheme ₹735342
(394021+1198791/4)*(1+6%)
Balance at age 45 years in debt scheme ₹966525
(1198791*3/4)*(1+7.5%)
Corpus accumulated for the world tour at the age of 45 966525+735342
=₹ 1701867

Q11 A) ₹ 26146322
Gross salary per annum ₹45 lakh
Tax paid ₹10.5 lakh
Net income in current year = 4500000-1050000 ₹3450000
Income contribution to the family ₹1897500
Remaining work life 26 years
Investment yield 9%
Expected rate in increase in salary 5%
PV of future income ₹ 32146322
Set = Begin
N = 26
I = 3.8095%
PV =?
PMT = -1897500
FV = 0
P/Y-C/Y=1
Sum assured (term + money back) ₹ 60 lakh
Additional insurance cover required = ₹ 32146322-6000000
₹ 26146322
Q12 3) A, C and D
Q13 A) LTCG ₹ 41400
For 1200 shares
Sale consideration (on 20th October 2020) ₹56, 400 (1200*47)
Less; - cost of acquisition (on 10thJune 2020) ₹72 000 (1200*60)
Short term capital loss (STCL) ₹-15600 (56400-72000)
Dividend received ₹6000 (0.50*10)*1200
Section 94(7) is applicable

For 800 shares
Sale consideration (on 20th December 2020) ₹20000 (800*25)
Cost of acquisition (on 10th June 2020) ₹48000 (800*60)
Short term capital loss (STCL) ₹-28000 (48000-20000)
Dividend received ₹4000 ((0.50*10)*800)
Section 94(7) is not applicable
LTCG on sale of gold ₹79000
Less; - STCL on sale of 1200 shares ₹9600 (15600-6000)
Less; - STCL on sale of 800 shares ₹28000
Net LTCG for AY 2020-21 ₹41400 (79000-9600-28000)
Q14 B) ₹163640
Indexed cost of acquisition ₹376250 (300000*301/240)
Sales consideration ₹1575000
LTCG ₹1198750
Invested in new house ₹500000
LTCG exempted ₹380555
(1198750*500000/1575000)
Taxable LTCG ₹818194 (1198750-380555)
Tax on LTCG ₹163639 (818194*0.20)
Or ₹ 163640 (round off)
Q15 B Option 2
In option 2 investor gets indexation benefit and will pay only 20% tax.
But in option 1 maturity amount will be less than FMP as TDS will be deducted every quarter
and balance amount is invested. Besides it interest will be taxed at 30%.

Additional Solution
Q1 A) Rs. 6599051
Current Monthly household exp 40000 p.m. 480000 p.a.
50% for Shambhavi 20000 240000 p.a.
Present Age of Shambhavi 12
Marriage Age of Shambhavi 25
Debt Fund Rate 7.5%
Inflation Rate 5%
PV of household expenses (CMPD; N=13,I=2.38..,PMT=240000,
FV=0,P/Y=C/Y=1,PV=solve)=2719703
PV of boarding school expenses
(CMPD;N=6,I=-2.272…., PMT=240000,FV=0, P/Y=C/Y=1,PV=solve)=1526363
Today’s marriage expense 2500000
Marriage inflation rate 7%
FV of marriage expense 6024613 (N=13, I=7, PV=-2500000, PMT=0, FV= Solve)
PV of marriage expense 2352985 (N=13, I=7.5, PV=-Solve, PMT=0, FV= 6024613)
Total insurance cover = 2719703+1526363+2352985 = Rs.6599051
Q2 B) Rs.37995826
Retirement age 60
post retirement life 25
Current expenses(Yearly) 40000x12=480000
current age 34
Inflation 5.00%
Debt return 7.50%
Real rate of return 2.380…%
FV of household expenses at 60 1706723
CMPD;N=26, I=5, PV=-480000, PMT=0, P/Y=C/Y=1, FV=solve(1706723)
Retirement corpus required at 60 32636766
CMPD;N=25,I=RRR(2.380…), PV=solve(-32636766), PMT=1706723,FV=0, P/Y=C/Y=1)
FV of charity at 70 5791816
CMPD;N=36, I=5, PV=-1000000, PMT=0,FV=solve(5791816), P/Y=C/Y=1
PV of charity at 60 2810154

CMPD;N=10, I=7.5, PV=solve(-2810154), PMT=0,FV=5791816, P/Y=C/Y=1
FV of another charity at 80 9434258
CMPD;N=46, I=5, PV=-1000000, PMT=0,FV=solve(9434258), P/Y=C/Y=1
PV of another charity at 60 2220948
PV of estate goal (2000000) at 60 327958
Hence retirement corpus = 32636766+2810154+2220948+327958 = Rs.37995826
Q3 C)₹5736
Current age 34
Retirement age 60
Life expectancy 85
Total inflation till retirement 5+2 = 7%
Current expenses 40000x12=480000
Expense at age 60 2787529
CMPD;N=26, I=7, PV=-480000, PMT=0, P/Y=C/Y=1, FV= solve(2787529)
Retirement corpus required at 60 56083908
CMPD;N=25, I=1.904… , PV=solve(-56083908), PMT=2787529, P/Y=C/Y=1, FV= 0
FV of equity mutual fund 48934161
Shortfall = 56083908 – 48934161=7149747
Suppose monthly investment begin with Rs.100
Ratio of Equity and debt for 10 years 80:20
FV of equity investment after 10 years 16994
CMPD;N=10x12, I=11, PV=0, PMT=-80, P/Y=12, C/Y=1, FV= solve(16994)
FV of debt investment after 10 years 3532
CMPD;N=10x12, I=7.5, PV=0, PMT=-20, P/Y=12, C/Y=1, FV= solve(3532)
Total FV after 10 years = 16994+3532 = 20526
Ratio of Equity and debt for next 10 years 60:40
FV of equity investment after next 10 years 47714
CMPD;N=10x12, I=11, PV=-20526x.60, PMT=-60, P/Y=12,C/Y=1, FV= solve(47714)
FV of debt investment after next 10 years 23985
CMPD;N=10x12, I=7.5, PV=-20526x.40, PMT=-40, P/Y=12, C/Y=1, FV= solve(23985)
Total FV after 20 years = 47714+23985=71699
Ratio of Equity and debt for next 10 years 40:60
FV of equity investment after next 5 years 51491
CMPD;N=5x12, I=11, PV=-71699x.40, PMT=-40, P/Y=12, C/Y=1, FV= solve(51491)
FV of debt investment after next 5 years 66110
CMPD;N=5x12, I=7.5, PV=-71699x.60, PMT=-60, P/Y=12, C/Y=1, FV= solve(66110)

Total FV after 25 years = 51491+66110=117601
Total FV after 26 year = 117601x1.06=124657
SIP required = (7149747x100)/124657= ₹5736
4. A)
5. D)
Cost of world tour today ₹1200000
Cost after 11 years from now ₹2797967
CMPD;N=11, I=8, PV=-1200000, PMT=0, P/Y=1, C/Y=1, FV= solve(2797967)
60% of these expenses 2797967x0.60 = 1678780
Monthly investment required ₹6756
CMPD;N=11x12, I=11, PV=0, PMT=solve(-6756), P/Y=12, C/Y=1, FV= 1678780

Case Study – 4 (Mahesh & Neelam)
Mahesh and Neelam approached you, a CFPCM practitioner for preparing a Financial Plan to achieve
their financial goals. Mahesh, aged 45 years, is working in Bengaluru for an MNC, at a managerial level.
His wife Neelam, aged 42 years, is working in a Private Company and has gross income of ₹ 5 lakh p.a.
The gross salary of both Mahesh and Neelam is likely to grow at 7% p.a. They are married for 22 years
now. The couple has two children - daughter Sapna, aged 18 years, pursuing her Graduation in
Economics, and son Varun, aged 16 years, studying in 12th standard. Sapna intends to pursue her post-
graduaton and doctorate in economic sciences from a foreign educational institution. Varun has
inclination to become a Doctor.
The family’s monthly household expenses are ₹ 60,000 excluding EMI on loans and Insurance
premiums. Mahesh’s family along with his mother are currently staying in a house which was owned by
his father, who passed away in December 2019. The house is valued at₹ 75 lakh today.
Mahesh has a term insurance of₹ 50 lakh (for 20 years, annual premium ₹ 13,985), the term expires 15
years from now. Both are covered under Group Medical Insurance by their respective employers. They
additionally have a ₹ 10 Lakh family floater policy (annual premium ₹ 20,386 paid by Mahesh).
Salary Breakup of Mahesh for FY 2020-21
Components Annually (₹)

Basic 7,16,000
House Rent Allowance 1,80,000
Dearness Allowance 2,50,000
Transport Allowance 96,000
Medical Reimbursement 15,000
Entertainment Allowance 60,000
Total 13,17,000
The couple’s assets as on 31st March 2020

1. Cash in Hand ₹ 50,000
2. Bank balance ₹ 2,50,000
3. Diversified Equity Mutual Fund units at market value ₹ 12.78 lakh
4. Equity Shares at market value ₹ 25.83 lakh
5. Debt Mutual Fund units at market value ₹ 12.17 lakh
6. PPF A/c balance ₹ 8.25 lakh (Mahesh), ₹ 3.15 lakh (Neelam), both maturing on 1st April 2024
7. ELSS Mutual Fund scheme (growth option), ₹ 75,000 invested on March 20, 2018 at NAV ₹
14.81 and ₹ 75,000 invested on February 3, 2020 at NAV of ₹ 16.95. The current NAV is ₹ 16.26
per unit.
8. A separate house in joint ownershipof Mahesh and Neelam with respective shares of 75% and
25%. This house has two floors and is let out for rent of ₹ 12,000 p.m. each floor Present
Market Value of this House is ₹ 1 crore
( Mahesh and Neelam had jointly taken a housing loan of Rs. 30 Lakh in the ratio of their
ownership of the house which cost them Rs. 47.50 Lakh on 1st April 2013. The loan is for 15
years at a fixed rate of interest of 9.25% p.a. They pay EMI proportionate to their ownership on
the last day of every month
9. Gold Ornaments at market value ₹ 8.35 lakh
10. Car at market value ₹ 2.60 lakh
11. 100 units of Sovereign Gold Bonds of 8-year maturity subscribed on 28th December 2019 at ₹
2987 per unit; market price quoted on 31st March 2020 is ₹ 2861; interest @ 2.50% p.a.
payable semi-annually on 30 June and 31 December
12. Government Securities (Gilt) MF Scheme; open ended scheme; Invested ₹ 4 lakh in New Fund
Offering on 23rd March 2018; NAV on 31 March 2020 is 12.642
13. Money back insurance plan of 20 year term on the life of Mahesh with sum assured of ₹ 5 Lakh
(Annual premium Rs. 28,875, due in March every year, paid 16 premiums. The policy provides
25% of basic sum assured each on expiry of 5th, 10th, 15th years, and on maturity of the policy.
(Reversionary Bonus accrued: Rs. 2,43,100)
14. Unit linked insurance plan (aggressive allocation; 70% to equity) of 10 years in the name of
Mahesh with sum assured of ₹ 5 lakh
(Annual premium of Rs. 35,000 p.a. due in end of April every year; six installments paid till date,
this year premium due. (current unit balance 15,554.221 units, NAV: Rs. 16.56 per unit)
Liabilities as on 31st March 2020

Housing loan outstanding : ₹ 20.89 Lakh
Goals & Aspirations
1) Plan for Varun’s medical education expenses for 6 years, beginning a year from now, estimated
to be annually ₹ 10 lakh (current costs) with cost escalation at 8% p.a.
2) Plan for Sapna’s Post Graduation from abroad after three years, estimated to cost lump sum ₹
75 lakh (current costs) cost escalation at 10% p.a.

3) Create a separate fund to provide holiday expenses annually throughout their retired life,
amounting to ₹ 75,000 in current terms and escalating at 7% p.a.
4) To accumulate funds for marriage of Varun and Sapna. At current costs, they will require ₹ 10
lakh and ₹ 15 lakh respectively for the marriages of Varun and Sapna when they individually
reach 28 years of age; such expenses escalate at 7% p.a.
5) Build a retirement corpus for inflation-adjusted current household expenses, retirement on
Mahesh’s age of 60 years, expenses required till Neelam’s survival.
Life Expectancy
Mahesh : 80 years
Neelam : 82 years
Assumptions regarding pre-tax returns in various asset classes:

1) Equity & Equity MF schemes/ Index ETFs : 11.00% p.a.
2) Balanced MF schemes : 9.50% p.a.
3) Bonds/Govt. Securities/ Debt MF schemes : 7.50% p.a.
4) Liquid MF schemes : 6.00% p.a.
5) Gold and linked investments : 6.00% p.a.
6) Real Estate appreciation : 6.50% p.a.
Assumptions regarding economic factors:
1. Inflation : 5.00% p.a.

2. Expected return in Risk free instruments : 5.50% p.a.
2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 4 (Mahesh & Neelam)
(Reference Date: 1stApril 2020)
Q1 You have explained Mahesh that while underwriting the Insurer may counter the effects of
insurers (to the extent that laws permit) ask a range of questions and may request
Medical or other reports on individuals who apply to buy insurance, so that the price quoted can
be Varied accordingly, and any unreasonably high or unpredictable risks rejected. (2 Marks)
A) Moral Hazard B) Morale Hazard
C) Adverse Selection D) Uberrimae fidei
Q2 Prior to providing any Financial Planning services, you a Financial Planning practitioner and
Mahesh, as your client shall mutually define the scope of the engagement. The letter of
engagement would define the scope of engagement by discussing (2 Marks)
i) Identification of the service(s) to be provided
ii) Financial Planning practitioner’s compensation arrangement(s)
iii) Analysis and evaluation of client’s current situation
iv) Determining the clients and the Financial Planning practitioner’s responsibilities;
v) Establishing the duration of the engagement;
vi) Determine the strategies to achieve financial goals
A) i), ii), iv) and v) B) ii), iii), iv) and vi)
C) i), ii), iii), iv) and v) D) i), ii), v) and vi)
Q3 You suggest Mahesh to achieve the goal for accumulation of funds for marriage expenses by
starting a monthly SIP immediately along with the lump sum of ₹5 lakh from existing funds
available in an aggressive fund for 7 years and shift to debt investments 3 years prior to daughter
marriage. What is approximate monthly investment required? (3 Marks)
A) ₹25719 B) ₹22289
C) ₹33268 D) ₹45259
Q4 Due to Global Equity Market condition Mahesh is not satisfied with the return generated by ULIP.
He want to surrender his ULIP. A premium allocation charges applicable in the policy is 20% for
the first 4 years, 10% for the remaining yea₹ Mortality charges of ₹ 1.95 per thousand, sum
assured of 5 lakhs and administrative charges ₹750 P.A charged in the beginning of the year from
the fund value and is fixed for the whole term of the policy. Fund management charges 1.75% of

closing fund value is deducted at the end of every year. He wants to know from you what should
be the surrender value of his policy. He had opted for aggressive. ULIP has given 9% return in
Aggressive option and 6% return in debt option since inception of policy. (5 Marks)
A) ₹209514 B) ₹220300
C) ₹240300 D) ₹210300
Q5 Mahesh wants to sell his current holding of gold ETF on the prevailing price of ₹2415 per unit. If
all units are sold at the sale price prevailing on 2nd April 2020, what would be the post-tax gains in
this transaction for AY 2021-22? And also calculate the return obtained on investment. (3 Marks)
A) 10.27 % B) 10.85%
C) 10.96% D) 10.98%
Q6 You observed that your client has some life insurance cover. He tells you that future living
expenses of his family must be insured along with his essential goal of medical/post-graduation of
his son and daughter. You suggest the client that the aggregate insurance cover should suffice to
meet education expenses when due, along with inflation adjusted living (household) expenses to
the extent of 80% of their current expenses for immediate next 10 years and 50% for the
succeeding 23 yeas. You compute the additional insurance cover amount needed which comes to
. (4 Marks)
A) ₹1.85 crore B) ₹1.2crore
C) ₹1 crore D) ₹90 lakhs
(Assume 7.5% rate of return is expected for the funds to be invested)
Q7 As part of the retirement strategy, you advise client to invest a sum of ₹40 000 and ₹20000
immediately in his and spouse's PPF account respectively and increase this investment by 20%
every year in the beginning of the financial year in all future years till normal maturity. The
contributions are rounded up to the nearest thousand. You also advise to extend their respective
accounts for two terms of 5 years each beyond the normal maturity by contributing maximum
permissible amounts in both the accounts. Further extension till retirement without contribution.
Find the combined corpus of accounts when the client retires. (Maximum subscription amount
per year is ₹1, 50, 000). (5 Marks)
A) ₹9354206 B) ₹8979990
C) ₹8700000 D) ₹9800000

Q8 Mahesh has started investing ₹30, 000 p.a. in a 10% p.a return instrument with immediate effect,
and increase the contribution by 20% every year of the prior year investment amount. Consider
accumulated corpus in PPF in previous question. If the expenses post retirement are curtailed by
50%, what maximum inflation would sustain his corpus till he survives, if the corpus is invested at
7% p.a.? (Take lifestyle inflation 1.75% above the normal inflation only in pre-retirement period).
(4 Marks)
A) 2.41% B) 1.71%
C) 9.97% D) 9.14%
Q9 Mahesh approaches you with 500000 stating that he would like to develop a financial plan and
invest in the market. He is investing first time and he would to choose an appropriate account.
What is the CFP professional most appropriate course of action? (2 Marks)
A) Open a brokerage account with margin
B) Determine whether a client has a consumer debt
C) Determine whether a client has a sufficient insurance coverage
D) Invest in mutual fund for the current financial year
Q10 Before finalizing the Financial Plan, Mahesh’s wife tells you that she wants to entrust the estate
issues to a solicitor, who is a friend of Mahesh. Which of the following is your best stand?(2
Marks)
A) Estate issues being substantial in the case, you maintain that the Financial Plan cannot be a
Integrated one if the same is outside your purview, hence decline.
B) This is permissible subject to such an arrangement finding an explicit mention in the
Financial Plan For the said activity.
C) This is permissible subject to the advice of the solicitor being integrated into the Financial
Plan and Monitored along with the Plan.
D) You agree to the arrangement subject to the advice of solicitor made known to you so that
you modify the Financial Plan accordingly.
Q11 Mahesh and Neelam want to create a separate fund for annual holiday vacation, after his
retirement till Mahesh expected life. If annual vacation expenses are withdrawn from the corpus
@ 9% p.a. Current cost of vacation is ₹75000 p.a, cost escalating at the rate of 7%. You suggest an
investment strategy by investing certain equal amount in the Debt & Equity fund and the double
the monthly investment at the every 5 years till his age of 60. He wants to know amount he
would invest in the last block of five years? (5 Marks)

A) ₹19188 B) ₹19438
C) ₹19884 D) ₹19446
Q12 Mahesh and Neelam availed housing loan of ₹30 lakh from a bank in April 2011. The foreclosure
charges are 5% of the outstanding amount. They ask you the better option than to repay the loan
at this stage. You suggest that the money to be repaid now has to be invested in an instrument to
generate a return while paying monthly installment from that investment fund. What should be
the breakeven annual yield to be targeted from that investment? (3 Marks)
A) 11.80% B) 12%
C) 8.37% D) 13%
Q13 Mahesh’s father has made a Will deed for distribution of his assets. Mahesh discusses with you
regarding Probate process, as per you which is not a feature of Probate process? (2 Marks)
A) The assets are gathered, applied to pay debts, taxes and expenses of administration and
B) Executor or Personal Representative named in the Will is in charge of this process.
C) All legal heirs will receive notices from the court to file objections.
D) The court will give orders to distribute the assets to the heirs as per intestate succession
Act.
Q14 Mahesh wants to know the lump-sum amount required to fund Varun and Sapna higher
education expenses if the funds are invested in debt fund using balance from debt MF. (3
Marks)
A) 12314954 B) 43602035
C) 45675439 D) 17687767
Q15 Mahesh own a house which has municipal value of 240000, fair rental value of 300000 and
standard rent 360000. 50% of the house is let out on rent of 8000p.m. and remaining half is used
for his own part time business which has earned him income of 750000 before deducting the
expenses in relation to said house property. The expenses incurred for the entire house include
Municipal Taxes (12000), Land revenue paid 8000, insurance premium 16000, interest on
borrowed capital and depreciation ₹40000 compute Mahesh house property and business
income. (5 marks)
A) 271000 B) 598222
C) 598200 D) 673660

1. Calculate the SIP for retirement corpus of Mahesh and Neelam. Invest equally in Equity and
Debt and rebalance after every 5 year. Consider post Retirement period only for 21 years.75%
of pre-retirement expenses will be required during post retirement life. Post retirement
investment in risk-free instrument.
A) ₹89890 B) ₹59394
C) ₹65789 D) ₹23456
2. Mahesh has received an attractive offer from Tours and Travel company for 7 days Europe trip
with family in which he has to pay only 20% upfront i.e. ₹50,000/- while remaining amount may
be repaid in 60 EMIs of ₹5750/- each. Mahesh wants to know the approx. The rate of interest
charged to him for this offer?
A) 14% B) 23.97%
C) 14.5% D) 12%
3. Mahesh wants to know that approximate Life Insurance covers he needs in case of he dies
today. He wants that his family should receive 90% of present household expense inflation
adjusted every month for the remaining expected life of Neelam. Assume life insurance claim
proceeds are invested by Neelam in debt instruments.
A) ₹45343222 B) ₹31104932
C) ₹15919898 D) ₹34543298
4. Couple will require approx. Retirement corpus ₹2.20 crore and they have earmarked their
(Mahesh & Neelam) PPF A/Cs to build the retirement corpus. Calculate the surplus/deficit in
their retirement corpus. Both will invest maximum permissible amount beginning of the year in
their PPF A/Cs till maturity and also during the extension period of PPF A/C till Mahesh’s
retirement.
A) ₹9899271 deficit B) ₹10855310 surplus
C) ₹23439045 deficit D) ₹43567890 deficit
5. You are advised Mahesh to build corpus for Sapana’s Post Graduation by earmarking 50% of a
portfolio of shares and also immediately invest monthly SIP in the equity fund for three years
Calculate monthly SIP required?
A) ₹789831 B) ₹876127
C) ₹345649 D) ₹193520

Solutions
Q1 C) Adverse Selection
Q2 A) i), ii), iv) and v)
Q3 A) ₹23382
Present age of daughter 18 years
Age when daughter gets married 28 years
Provision for daughter’s marriage expense at present cost 15 lakh
Present age of son 16 years
Age when son gets married 28 years
Provision for son marriage expense at present cost 10 lakh
Marriage cost escalation rate 7%
Aggressive fund rate 11%
Safe investment rate 7.5%
Cost at the time of daughter’s marriage 10 years from now ₹2950727
(1500000*1.07^10)
PV of daughter’s marriage expense in safe investment 3 years prior ₹2375219
(2950727/1.075^3)
Cost at the time of son’s marriage 12 years from now ₹2252192
(1000000*1.07^12)
PV of son’s marriage expense in safe investment 5 years prior ₹1568784
(2252192/1.075^5)
Total fund required for both marriage switched to safe investment ₹3944002
(2375219+1568784)
Monthly investment required ₹23382
Begin mode
N = 7*12
I = 11%
PV = -500000

PMT =? = -23382
FV= 3944002
P/y=12, c/y=1
(Daughter marriage is after 7 years and funds are to be switched to safe investments 3 years
prior to. So total time for monthly investment in aggressive fund along with lump sum today is 4
year The expense after utilizing for daughter’s marriage continue to remain in safe until
required for son’s marriage.)
Q4 A) ₹209514.35
Policy yr Annual Premi Amt Polic Mort Fund value Inves Fund value Fmc Outstandi
premiu um investe y ality after tmen c/f (before charges ng fund
m allocat d adm charg charges t fmc) value
ion in es retur
charge char n
s ges
4/14 to 4/15 35000 7000 28000 750 975 26275 9% 28639.75 501.19 28138.55
4/15 to 4/16 35000 7000 28000 750 975 54413.55 9% 59310.76 1037.93 58272.82
4/16 TO 4/17 35000 7000 28000 750 975 84547.82 9% 92157.12 1612.74 90544.37
4/17 TO 4/18 35000 7000 28000 750 975 116819.37 9% 127333.11 2228.32 125104.78
4/18 TO 4/19 35000 3500 31500 750 975 154879.78 9% 168818.96 2954.31 165862.62
4/19 TO 4/20 35000 3500 31500 750 975 195639.62 9% 213247.18 3731.82 209514.35
Q5 A) 10.27%
Number of units 300 units
Cost of acquisition (17th October 2011) 983 per units
Sale price (2nd April 2020) 2415 per units
CII index for the year 2011-12 184
CII index for the year 2020-21 301
Sale consideration of gold ETF ₹724500 (2415*300)
Cost of acquisition (17th October 2009) ₹294900 (300*983)
Indexed cost of gold ETF ₹482417.93
(294900*301/184)

Long term capital gains with indexation benefits ₹242083
(724500-482417.93)
Long term capital gains tax (@20.6) ₹49896.098
Post-tax consideration price of sold units ₹674630.902
(724500-49896.098)
Rate of return (CAGR) = 10.49%
Alternatively XIRR = 17-10-12 (-294900)
02-04-21 (674630.90)
XIRR 10.27%
Q6 A) ₹18440411
Rate of return 7.5%
Inflation for living expenses 5%
Real rate of return 2.380….%
Current household expenses(yearly) ₹720000
Age of son 16 years
Medical education of son to begin after a year and required for = 6 years
Current cost of medical education ₹10 lakh
Medical education cost escalation 8%
Pv of future cash outflows of medical expenses 6555818
(Begin, N=6, I=-0.462….., PV=?(-6555818), PMT =1000000x1.08, FV=0, p/y=c/y=1)
PV of son medical education today ₹6098435
(6555818/1.075)
Age of daughter 18years
Higher education of daughter to begin after 3 years and required amount = ₹75 lakh
Cost escalation of higher education for daughter 10%
PV of daughter post-graduation expenses ₹8035519
(FV of 75 lakh after 3 years and discount it at present value @ 7.5%)
PV today of 80% of present expenses for 10 years ₹5193112
(Begin, N=10, I=2.380…., PV=?, PMT= -80% of 720000, FV=0, P/Y,C/y=1)
(FV of current expenses after 10 years ₹1172804 p.a.
(Begin, N=23, I=2.380…., PV=?, PMT =50% of 1172804, FV=0, p/y, c/y=1)
PV today of 50% of present expenses for the succeeding 23 years ₹5113345
(10538767/1.075^(10))
Total expenses and cost required today = ₹24440411 (6098435+8035519+5193112+5113345)
Existing insurance coverage ₹60 lakh
Additional coverage required ₹18440411
(24440411-6000000)
Q7 A) ₹9354206
PPF balance as on 31.03.2020 – Mahesh ₹825000
PPF balance as on 31.03.2020 – Neelam ₹315000
Due maturity date 01.04.2021
PPF rate of return 7.75%
Total installment till due maturity (April’ 19, 20, 21, 22) 4 years
Clients account;
Contribution in April 2019 ₹40000
Balance as on 31.03.2020 ₹932038
Balance as on 31.03.21 ₹1055991
Balance as on 31.03.2022 ₹1200325
Balance as on 31.03.2023 ₹1368775
Spouse account;
Balance as on 31.03.2020 ₹360963
Balance as on 31.03.21 ₹414798
Balance as on 31.03.2022 ₹478192
Balance as on 31.03.2023 ₹552964
Total accumulation till normal maturity (1-April-2023) = ₹1921739
(1368775+552964)
Number of contributions in two extended terms of 5 years each 10 years
₹1, 50,000 maximum to be invested in both accounts amounting to ₹3, 00, 000
PPF account balance after 10 years = ₹8681398 (Begin, N=10, I=7.75%, PV=-1921739, PMT=-
300000, FV=? P/y=C/y=1)
PPF account balance at retirement (8681398x1.0775)₹9354206
Q8 A) 2.41%
Current age of Mahesh 45 years
Retirement age of Mahesh 60years
Post retirement survival period 20 years
Investment amount with immediate effect ₹30, 000
Amount to be incremented every year of previous amount 20%
Rate of return from investing towards retirement corpus 10%
Corpus to be accumulated on retirement ₹3705825
Growing annuity formula = (30000*(1+10%)*(1+10%)^15-(1+20%)^15/(10%-20%)) 3705825
PPF expected corpus on retirement ₹9354206
Total corpus = ₹13060031
Current expenses = ₹720000 p.a.
Inflation including lifestyle inflation 6.75%
Expense on retirement ₹1918009
(720000*1.0675^15)
Curtailed expense on retirement ₹959005
Expect real rate of return for inflation linked annuity = 4.48% (Begin, n=20, I=? PV=-13060031,
PMT=959005)

Return from corpus post retirement 7%
Maximum inflation for a 20 years inflation linked annuity = 2.41% (1+7%)/(1+4.48%)-1)
Q9 B) Determine whether a client has consumer debt

Q10 B) This is permissible subject to such an arrangement finding an explicit mention in the Financial
Plan For the said activity.
Q11 A) ₹19188
Assume ₹100 invested equally in Equity & debt fund
Block of 45 to 50 years
Equity = ₹3956 (Begin, N=5*12, I=11%, PV=0, PMT=-50, FV=? P/Y=12, C/y=1)
Debt Fund = ₹3625 (Begin, N=5*12, I=7.5%, PV=0, PMT=-50, FV=? P/y=12, c/y=1)
Block of 50 to 55 years = Double monthly Investment
Equity = ₹14578 (Begin, N=5*12, I=11%, PV=-3956, PMT=-100, FV=? P/Y=12, C/Y=1)
Debt = ₹12454 (Begin, N=5*12, I=7.5%, PV=-3580, PMT=-100, FV=? P/Y=12,C/y=1)
Block of 55 to 60 years = double monthly investment
Equity = ₹40388 (Begin, N=5*12, I=11%, PV=-14578, PMT=-200, FV=? P/y=12, C/Y=1)
Debt = ₹32380 (Begin, N=5*12, I=7.5%, PV=-12454, PMT=-200, FV=? P/y=12, C/Y=1)
Total accumulated corpus at the time of retirement ₹72768
Current cost of vacation ₹75, 000
Cost escalation 7%
Inflated Amount required at the time of retirement ₹206927 (75000*1.07^15)
Return = 9%
Total corpus required at the age of 60 = ₹3490723 (Begin, N=20, I=1.869…%, PV=? PMT =-
206927, FV=0, P/y, C/Y=1)
By using unitary method ₹4797 (3490723*100/72768)
₹4797 is the monthly SIP for the block of 45 to 50
Double the monthly investment (50 to 55) ₹9594
Further double monthly investment = (55 to 60) ₹19188

Q12 C) 8.37%
Outstanding tenure 96 months
Outstanding principle amount ₹2089000
This outstanding amount is the present value of 96 future EMI @ 9.25% compounded monthly
hence, the EMI is ₹30875 (N=96, I=9.25, PV=-2089000, PMT=? FV=0, P/y,c/y=12)
Pre closure charges (5% of outstanding balance) ₹104450
(5% of 2089000)
Loan outstanding on 1st April 2020 if not continued further ₹2089000
Total amount to be paid in April 2020 to repay the loan ₹2193450
(2089000+104450)
If the amount is invested over 96 months by reducing EMI of
₹30875 the rate of interest to sustain this arrangement is8.37% p.a.
(Begin, N=96, I=? PV=2193450, PMT=-30875, FV=0, P/Y=12, C/Y=1)

(This amount is the present value of 96 monthly payment of ₹30875 at the required rate of
return)
Q13 D) The court will give orders to distribute the assets to the heirs as per intestate succession Act.
Q14 A) ₹12314954
Rate of return 7.5%
Balanced available from debt MF ₹12.17 lakh
Varun’s medical education expenses ₹10 lakh(current cost) required one year from now and
growing @ 8% for the next 6 years
PV today ₹6098435
(calculate the inflated cost for each year and then discount it @ 7.5% today)
Sapna’s post-graduation expense ₹75 lakh required after 3 years, cost escalation @ 10 %
Future value after 3 years ₹9982500
(7500000*1.10^3)

PV today ₹8035519
(9982500/1.07^3)
Total fund required (6098435+8035519) ₹14131954
Available fund ₹12, 17, 000

Additional required ₹12314954
(14131954-1217000)
Q15 D) ₹673660
Let out house (50%) MV 120000
FRV 150000
SR 180000
Actual rent 96000
GAV 150000
(-) Municipal taxes 6000
NAV 144000
(-) 24 (a) 30% of NAV 43200
(b) Interest 139140
Net Income (-38340)
Business Income ₹750000
Less a) municipal tax 6000
b) Land revenue 4000
c) Insurance paid 8000
d) Depreciation 20000
Net Business Income ₹712000

Total income ₹673660 (712000-38340)

Additional Solution
1. B) 59394
Current yearly expenses 720000
Expense required after retirement 720000x0.75=540000
Inflation rate 5%
Expense at age 60 1122621
Risk free rate 5.5%
Post retirement period 21 years

Retirement corpus at 60 22490573
CMDP;N=21,I=RRR(0.476…), PV=solve(22490573), PMT=1122621, FV=0,P/Y=C/Y=1
Let us assume SIP investment is ₹100

FV of equity investment for 5 years
CMPD; N= 5X12, I=11, PV=0, PMT=-50, FV=solve(3956), P/Y=12,C/Y=1
FV of debt investment for 5 years
CMPD; N= 5X12, I=7.5, PV=0, PMT=-50, FV=solve(3625), P/Y=12,C/Y=1
Total FV after 5 years =3956+3625 7581
FV of equity investment after 10 years
CMPD; N= 5X12, I=11, PV=-7581x0.50, PMT=-50, FV=solve(10343), P/Y=12,C/Y=1
FV of debt investment after 10 years
CMPD; N= 5X12, I=7.5, PV=-7581x0.50, PMT=-50, FV=solve(9067), P/Y=12,C/Y=1
Total FV after 10 years = 10343+9067 19410
FV of equity investment after 15 years
CMPD; N= 5X12, I=11, PV=-19410x0.50, PMT=-50, FV=solve(20309), P/Y=12,C/Y=1
FV of debt investment after 15 years
CMPD; N= 5X12, I=7.5, PV=-19410x0.50, PMT=-50, FV=solve(17558), P/Y=12,C/Y=1
Total accumulated value after 15 years = 20309+17558 37867
SIP required = (22490573x100)/37867 = 59394

2. B) 23.97%
100% value of loan is ₹250000

CMPD; N=60, I=solve(23.97), PV=200000, PMT=-5750, FV=0, P/Y=C/Y=12
3. C) ₹16810921
CMPD; N= 40X12, I= RRR(2.38…), PV=solve(-16810921), PMT=60000X0.90, FV=0, P/Y=12, C/Y=1

4. A) 9899271
PPF balance in A/C 12100729

CMPD; N= 15, I=7.75, PV=-1140000, PMT=-300000, FV=solve(12100729), P/Y=C/Y=1
Shortfall in retirement corpus = 22000000-12100729 = 9899271
5. D) 193520
FV of sapna's PG goal 9982500
50% of equity shares 1291500
FV of equity shares 1766295
CMPD;N=3, I=11, PV=- 1291500, PMT=0, FV=solve(1766295), P/Y=C/Y=1
Shortfall = 9982500-1766295= 8216205
SIP required 193520
CMPD; N=3X12, I=11, PV=0, PMT=solve(-193520), FV=8216205, P/Y=12, C/Y=1

Case Study – 5
Sanjay aged 31 years is working in a managerial capacity with a private sector bank in Mumbai. He has
been married for two years now. His wife Sherlyn is 28 years old and son Ajinkya is aged 1 year. They
stay in a rented flat. Sanjay expects to work till 62 years of age. His salary details for the year beginning
on date are as follows:
Particulars Amount (₹ per annum)
Basic 6,60,000
H.R.A. 1,98,000
Executive Allowance 9,60,000
Medical Reimbursement 15,000
EPF: Employee’s contribution 79,200
EPF: Employer’s contribution 79,200
Monthly Expenses of the family are as below:
House Rent Paid ₹ 25,000
Household Expenses ₹ 60,000
Following are the details of his assets as on 31st March 2020:
Equity Mutual Fund Schemes ₹8.25 lakh (Five schemes of different Mutual Fund
houses; one is Sector Fund, two are schemes with
focus on midcap stocks, two are diversified funds
with large cap focus; SIP of ₹5,000 started 3 year
ago and continuing in each scheme in the
beginning of every month)
Balanced Mutual Fund Scheme ₹ 3.2 lakh (Invested 15,000 units at ₹10 per unit in
NFO on 28-03-2017; continued monthly SIP of ₹
5,000 for a year from 01-01-2018; scheme’s asset
allocation in equities/debt is 50:50; dividend
reinvestment option, net dividends of ₹ 1.5 per
unit reinvested at NAV ₹10.323 on 04-02-2019 and
₹ 2.5 per unit reinvested at NAV ₹11.269 on 05-03-
2020)

Equity Linked saving scheme (ELSS) Invested in 5,000.000 units at price of ₹ 11.62 per
unit on 2nd Feb, 2014; further invested ₹1,50,000
at price of ₹ 13.47 per unit on 18th Jan, 2017;
open-ended scheme; Growth option. NAV on 31st
March, 2020: ₹ 22.893 per unit.
Gold Jewelry and coins 100 grams; received as gift on the occasion of
marriage in the financial year 2017-2018; Current
Price of Standard Gold (22K) ₹ 2,771 per gram.
Car ₹ 3,00,000 (depreciated value)

PPF Account: ₹ 3,77,440; the account was opened on 8th July,
2014
Balance in Savings Bank Account ₹1,50,000

Balance in Fixed Deposit ₹ 3,00,000 invested with the bank on 1st August
2018 for 24 months with cumulative option. The
interest is compounded quarterly at the rate of 9%
p.a.
Employees’ Provident Fund ₹ 8,27,325 (Cumulative balance);

House Property Situated at Aurangabad, inherited on 1st December
2019 when the market value was ₹ 40 lakh
Term Insurance Plan Sum assured ₹50 lakh; ₹ 10,000 p.a. premium.
He has following Financial Goals:

1. Possessing a new flat in 18 months from now at Mumbai; Cost negotiated ₹ 1.20 crore; availed a
loan at 80% ‘loan to value; interest pre-possession 9% p.a.; 25 year loan tenure after possession of
flat.
2. Retirement at the age 62; retirement corpus to yield inflation adjusted expenses till Sherlyn’s
lifetime.
3. Buying a car costing ₹ 10 lakh (then price) in October 2020 after disposing of the existing car.
4. Admission of Ajinkya to an international school at age 4; Admission fee ₹ 4 lakh; ₹ 2 lakh p.a. in
first 6 years, ₹ 3 lakh p.a. in the next 9 years (all at current prices, cost escalation 8% p.a.)
5. Ajinkya’s higher education when he attains 19 years of age; ₹ 25 lakh would be required (at
current prices, Higher Education expenses escalating at 8% p.a.).
6. Create a corpus till age 50 for annual excursion at ₹ 1 lakh (current costs), annual withdrawals
begin at age 50 and continue till Sanjay survives. Such expenses escalate at 8% p.a.

7. Ajinkya’s marriage expenses ₹ 15 lakh current costs, escalating at 6% p.a., marriage at age 27
8. A lump sum for his venture 10 years prior to his proposed retirement
Life Parameters
Sanjay’s expected life : 80 years
Sherlyn’s expected life : 80 years

5) Gold & Linked investment : 6.00% p.a.


2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 5 (Sanjay)
(Reference Date: - 1st April 2020)
(1) Sanjay’s father has made a Will deed for distribution of his assets. Sanjay discusses with you
regarding Probate process, as per you which is not a feature of Probate process? [2 Marks]
A) The assets are gathered, applied to pay debts, taxes and expenses of administration and
B) Executor or Personal Representative named in the Will is in charge of this process.
C) All legal heirs will receive notices from the court to file objections.
D) The court will give orders to distribute the assets to the heirs as per intestate succession
Act.
(2) You have disclosed in writing to sanjay on your ability to advise and sell on a restricted range of
products, and some other limitation of their capacity to serve him. You have complied with the
Code of Ethics of . [2 Marks]
A) Integrity B) Objectivity
C) Fairness D) Diligence
(3) A life insurance company is offering a life insurance policy for sanjay wherein 20 annual
contribution of ₹60,000 starting from today give the following three maturity figures after
deduction of total charges and with a sum assured of ₹1 crore for the whole term as follows;-
[3 Marks]
1) Guaranteed maturity benefit of ₹741741
2) Non-guaranteed maturity benefit @ 6% P.A ₹908071
3) Non-guaranteed maturity benefit @ 10% P.A ₹1460179
The policy has provision that in case of any casualty with the life insured, the company shall be
paying higher of the then available fund value or applicable sum assured. Sanjay wants to provide
by the company if standalone term insurance of ₹1 crore is available of ₹37, 000 p.a. according
you the same is ?
A) Minimum-4.36% maximum-10.06% B) Minimum-4.36% maximum-9.05%
C) Minimum-5% maximum-8% D) Minimum-5.5% maximum-10.06%

(4) Sanjay wants to buy new car after 6 months. He will sell the car for ₹150000 after using it for 5
years and take the loan on the balance amount. One of the car dealers gave him an offer for the
loan @ 11.75% on monthly reducing balance basis and a 2% processing charges. Sanjay requested
him to cumulate the processing charges with the loan amount and dealer agreed with the
condition that the loan amount will be increased to the extent wherein 2% is levied on the total
loan amount and sanjay will pay the loan in 24 months. What will be the monthly EMI?[4 Marks]
A) ₹40711 B) ₹42317
C) ₹39102 D) ₹42102
(5) Sanjay aged 31 years lives with his wife Sherlyn aged 28 year. They wish their retirement corpus,
to sustain 70 % of their pre-retirement household expenses inflation adjusted, till Sanjay Lifetime
and 70% of then expenses till Sherlyn expected life. They also want to gift ₹50 lakh to their child
and an additional ₹25 lakh towards charity to an Old Age Home at Sanjay age of 70 yea₹ The
sums are at absolute values then. They also wish to provide in the corpus an additional ₹10, 000
per month (current costs) towards healthcare after sanjay age of 70 year. You estimate the
required corpus, if Sanjay retires at 62 years investment yield is 7% p.a., and inflation is 5.5% to
be: [5 marks]
A) ₹4 Crore B) ₹5 Crore 74 lakh
C) ₹4 crore 40 lakh D) ₹4 crore 70 lakh
(6) From the above question, for retirement required corpus he will utilize his existing investment in
PPF A/c and ELSS A/c. you advice not to further invest in ELSS and shift the entire ELSS fund to
debt fund at the age of 55. PPF A/c will extend 3 more blocks after maturity and shift the fund to
debt fund. Sanjay wants to know from you how much the percentage of required corpus he will
save on retirement and how much additional amount he need to save every month till
retirement if amount is invested in equity fund? (Assume 30000 annual saving in PPF) [5
Marks]
A) 22% and ₹15172 B) 20% and ₹14010
C) 30% and ₹15505 D) 26% and ₹15043
(7) Sanjay holds two different corporate bonds, details of which are as under:
Bond A, FV 100000, coupon rate 9.25%, time left to maturity 3 years, MV 98000
Bond B, FV 50000, coupon rate 11%, time left to maturity 3 years, MV 51300
The rate of Discount is 10% p.a., for both the bonds.

Sanjay wants to liquidate either Bond A or Bond B or both. Assuming that interest rate is paid
annually (at the end of the year), in case of both Bond A and Bond B, what would you advise
Sanjay?
A) Sell Bond A B) Sell Bond B
C) Sell Both Bonds A & B D) Don’t sell any of the Bonds
(8) Sanjay is member of Employee’s pension scheme, if Sanjay decides to leave his present job at the
age of 32 after 8 years of service what will happen to his existing pension scheme?[2 Marks]
A) He can either take withdrawal benefit or scheme certificate so that his 8 year service can be
added to any future service that he may put in, in any other covered establishment.
B) He cannot take any withdrawal benefit immediately but can add it to any future service that
he may put in, in any other covered establishment.
C) He can either take withdrawal benefit or scheme certificate only on completion of 10 years
of service.
D) He can take withdrawal benefit only.
(9) Sanjay & his wife have been discussing with you the effect of inflation/deflation on household
budget. She has asked you whether there is any product category which has actually shown the
deflationary trend over a period of last 20 years’ time. According to you it is .
[2 Marks]
A) Computer B) Patrol
C) Education D) Groceries
(10) Sanjay has asked you about FPSB India’s nature of constitution. You have explained him that FPSB
India is it ? [2 Marks]
A) Self-regulatory organization B) Professional standards setting body
C) Professional regulatory organization D) A quasi government body
(11) Calculate the additional life insurance cover if he wants present Inflation adjusted household
expense till his wife expected life. And if claim proceeds of insurance along with other financial
assets could be invested to generate at 8% p.a. Assume 1.5% above the inflation Rate.[4 Marks]
A) ₹186 lakh B) ₹150 lakh
C) ₹160 lakh D) ₹171 lakh

(12) Sanjay would like to know the monthly SIP investment required today for his son higher
education expense? You have advised him to equally invest him equity and debt Fund per month
till one month prior to completion of Ajinkya’s age 19. You have further advised him to withdraw
40% accumulated corpus 2 years prior to the age of 19 and invest it in debt fund and further
withdraw another 50% balance of equity corpus one year prior to the age of 19 and invest in debt
fund. [5 Marks]
A) ₹11192 B) ₹10100
C) ₹16753 D) ₹11900
(13) Sanjay wishes to avail housing loan to the extent of 80% of the value of the desired house in the
next 18 months. He wants to fully repay the loan according to the tenure. You consider 9.75%
p.a. as the average interest rate on the housing loan to be availed. He asks you by how much EMI
on the loan would exceed his current monthly outgo towards house rent. [3 Marks]
A) ₹36000 B) ₹36352
C) ₹35900 D) ₹63544
(14) Calculate Sanjay’s income tax liability for AY 2021-22. He contributes 20,000 p.a. in PPF. Also he
paid ₹10,000 for term insurance and ₹30000 for medical policy for his parents aged above 60
who are not dependent on him. He earns interest of ₹2,430 on his saving bank account and
interest of ₹14815 on his fixed deposits. [5 Marks]
A) ₹229116 B) ₹229115
C) ₹221990 D) ₹260710
(15) Calculate return on ELSS mutual fund scheme for Sanjay. If he wants to redeem his entire units at
current applicable NAV. [3 Marks]
A) 8.7% B) 18.5%
C) 14.80% D) -2.7%

Additional questions
1. One of Sanjay’s friends has offered him an attractive business proposal. In this proposal a
partnership firm consisting of two partners, Sanjay and his friend, shall take the franchise of a
reputed financial education company in which their investment and profit sharing shall be
40%:60%. Franchise rights shall be valid for 5 years and the project requires an upfront
investment of ₹25 Lac for the required infrastructure. This may be sold to the company after 5
years applying straight line depreciation @ 10%. The projected profits from the firm are as
follows.
Year 1 ------- ₹2.30 Lac
Year 2 ------- ₹3.50 Lac
Year 3 ------- ₹4.25 Lac
Year 4 ------- ₹4.75 Lac
Year 5 ------ ₹ 5.00 Lac
Sanjay wants to know what IRR shall earn on his investment from this project.
A) 6.75% B) 9.75%
C) 7.85% D) 5.75%
2. Sanjay Want to Immediately Invest ₹10 lakh into Life Annuity which should start After 10 yr He
Distributes Equally in 2 Annuities. 1st Provides annuity for 25 yrs @7.5% without return of
purchase price & other one provides Annuity for 25yrs @6.5% with Return of Purchase price.
Find The Annuity Available in The 1st month & the Available Life Annuity. Assume the amounts
will be invested @ 7% p.a. during deferment period.
A) ₹54317 B) ₹15617
C) ₹13587 D) ₹12217

Solutions
Q1 D) The court will give orders to distribute the assets to the heirs as per intestate succession Act.
Q2 B) Objectivity
Q3 A) Minimum-4.36% maximum-10.06%
Annual contribution 60,000
Term insurance charges 37000
Investment portion = 60,000 – 37,000 23,000
Minimum guarantee 741741
Maximum guaranteed @ 10% 1460179
So IRR based on company projection =
Minimum = 4.35% (cash flow function = 1 to 20 = -23,000 and 21 = 741741)
Maximum = 10.06% (cash flow function = 1 to 20 = -23,000 and 21 = 1460179)
Q4 A) ₹40711
Cost of car after six months ₹10 lakh
Current car sold for ₹150000
Processing charge is 2%
Financed amount = 10, 00,000 – 1, 50,000 ₹850000
850,000 + 2% of 850000 ₹867000
Set = end
N = 24
I = 11.75%
PV= -867000
PMT =?
FV= 0
P/y=12, C/y=12
Monthly EMI ₹40711

Q5 B) ₹5 Crore 74 lakh
Household expenses now ₹720000 p.a.
Expenses at 62 years of Sanjay ₹3785809 (720000*1.055^31)
70% of such expenses ₹2650066 (3785809*70%)
PV of expenses from 62 to 70 ₹20188975
Medical expenses at age 70 ₹968338(120,000*1.055^(70-31)
Expenses at the age 70 ₹4067021(2650066*1.055^8)
Total expense at age 70 ₹5035359 (4067021 + 968338)
PV at age of 70 from 70 to 80 ₹47292962
Set = Begin
N = 10
I = 1.42…. (RRR)
PV =? (-47292962)
PMT = 5035359
FV = 0
P/Y=1, C/Y=1
PV at age of 62 from 62 to 70 ₹27524934 (47292962/1.07^8)
Expenses at age 70 ₹5035359
Expenses at age 80 ₹8601121 (363126*1.055^10)
70% of such Expenses ₹6020785 (8601121*70%)
PV at 80 from 80 to 83 ₹17810328
Set = Begin
N=3
I = 1.42 (RRR)
PV =? (17810328)
PMT = 6020785
FV = 0
P/Y=1, C/Y=1

PV at 62 (62 to 80) ₹5269433 (17810328/1.07^18)
PV at 62 of gift 50 lakh to children at 70 ₹2910046 (5000000/1.07^8)
PV at 62 of 25 lakh at age 70 ₹1455023
Total corpus at age 62 ₹57348411 (Sum of all PV 20188975+27524934+5269433+2910046+
1455023)
Q6 D) 26% and ₹15043

2nd February 2013 = 5000 units*11.62 ₹58100
18th January 2016 =150,000/13.47 11135.85746 units
Total units = 11135.85746 + 5000 16135.85746 units
Balance amount = 16135.85746 x 22.893 ₹369398.1849
ELSS future value at the age 55 ₹4521122.225
(369398.1849*1.11^24)
FV at the age of 62 ₹7500764(4521122.225*1.075^7)
PPF current balance ₹377440
Yearly saving ₹30000
Maturity amount ₹1388846
Future value after 3 five years blocks ₹5115935
Future value at retirement ₹7344586 (5115935*1.075^5)
Total corpus on retirement ₹14845350
(7500764 + 7344586)
Required corpus ₹57348411 ( previous question)
Total Savings (percentage) 25.89%
Shortfall ₹42503061
Additional monthly SIP required = 15077
Set = begin
N = 31*12
I = 11
PV = 0
PMT =?(-15043)
FV= 42503061

P/y=12, C/y=1
Q7 B) Sell Bond B
In order to ascertain the relative attractiveness of the Bonds, we compute the value of each
Bond and compare it with the market price.
Value of Bond A= 98,134.86 = PV (10%,3,-(100000*9.25%),-100000,0)
Value of Bond A>Market price of Bond A. i.e. Bond A is underpriced
Value of Bond B= 51,243.43 = PV(10%,3,-(50000*11%),-50000,0)
Value of Bond B<Market price of Bond B. i.e. Bond B is over-priced
Conclusion: Sell Bond B
Q8 A) He can either take withdrawal benefit or scheme certificate so that his 8 year service can be
added to any future service that he may put in, in any other covered establishment.
Q9 A) Computer
Q10 B) Professional Standards Setting Body
Q11 A) ₹ 186 lakh
Equity MF 825000
Balanced MF 320000
ELSS 369398 (16135.85746 x 22.893)
PPF 377440
Bank FD’s 346337 (ignoring tds)
EPF 827325
Bank Account 150000
Total Value of Assets ₹3215500
Rate of return 8%
Inflation = 5% + 1.5% 6.5%
Present household expenses 720000 p.a.
Sherlyn present age 28yrs
Sanjay present age 31yrs
Sherlyn expected life 80 y₹
Expense required for the balance life = 80 – 28 52 y₹
Present value of inflation adjusted expenses ₹26789909

Set = begin
N = 52
I = RRR (1.4084….)
PV=?
PMT= 720000
FV= 0
P/y=1, C/y=1
Current insurance cover ₹50 lakh
Additional requirement ₹18574409
(26789909-3215500-5000000)
Q12 C) ₹16753
Current cost of higher education ₹25 lakh
Cost of escalation 8%
Required at the age of 19
Escalated value at the age of 19 ₹9990049 (2500000*1.08^18)
Assume ₹100 is invested according to ratio
Equity Debt
Set =begin Set = begin
N = 16*12 N = 16*12
I = 11% I = 7.5%
PV = 0 PV= 0
PMT= -50 PMT = -50
FV =? (24892) FV =? (18147)
P/y=12, C/y=1 P/y=12, C/y=1
40% equity transferred to debt fund
Set = begin (equity balance after 1 year)

N = 1*12
I = 11%

PMT = -50
PV = -14935 (60% of 24892)
FV =? (17213)
P/y=12, C/y=1
Set = begin (debt balance after 1 year)
N = 12
I = 7.5%
PV = -28104 (40% of equity balance+18147)
PMT = -50
FV =? (30836)
P/y=12, C/y=1
50% balance transferred to debt fund
Set = begin
N = 1*12
I = 11%
PV= -8606.5 (50% of 17213)
PMT = -50
FV =? (10188)
P/y=12, C/y=1
Set = begin (debt balance after 1 year)

N = 1*12
I = 7.5%
PV = -39442.5 (8606.5+30836)
PMT = -50
FV =? (43025)
P/y=12, C/y=1
Total corpus = ₹53213 (43025+ 10188)
Monthly SIP is ₹18774
(9990049*100/53213)

Q13 D) ₹63544
Current value of desired house = ₹12000000
Expected value of house after 18 Months ₹13188811
(12000000*(1+6.5%) ^1.5)
Loan amount to be availed ₹10551049 (80% of 13188811)
Tenure of the loan 25 years
Rate of interest 9%
EMI on housing loan ₹ 88544
Current rental outgo ₹25000
EMI in excess of current house rent ₹63544 (88544-25000)
Q14 D) ₹260710
Income under the head salaries
Basic salary 660000
H.R.A Received 198000
Less exempt 198000 0
Medical reimbursement 15000
Executive allowance 960000
Income from salary ₹1635000
Standard Deduction -50000
Gross total income from salary 1585000

Saving account interest nil (exempt up to
₹10000 U/S 80 TTA)
Interest on fixed deposit ₹14815
Income from other sources 14815
Gross total income ₹1599815
Less deduction u/s 80 (c)
PPF 20000
Premium of term insurance 10000

EPF contribution 79200
Deduction u/s 80 (d)(Medical policy) 30000
Total income ₹1460615
Round off ₹1460620
Tax on total income ₹250686
0-250000 0% 0
250001-500000 5% 12500
500001-1000000 20% 100000
More than 10 Lacs 30% 138186
Add (cess)@4% ₹10027

Tax Payable ₹260713
Round off ₹260710
Working note
H.R.A calculation
Least of the following will be exempt
1. Actual received ₹198000
2. Rent paid – 10 % of salary ₹234000 (300000-66000)
3. 50 % of the salary ₹330000
Taxable = actual received – exempt
₹0 = ₹198000 –₹198000
Q15 C) 14.80%
Dates Amount
2-Feb-14 -58100 (5000*11.62)
18-Jan-17 -150000 (150000/13.47 = 11135.85746 units)
1-Apr-20 369398((5000+11135.85746)*21.06))
XIRR 14.80%

Additional Solution
1. A)
CASH
I =0
CASH D EXE
1 = -2500000x0.40
2 = 230000x0.40
3 =350000x0.40
4 =425000x0.40
5 =475000x0.40
6 =(500000*.4)+(2500000*.50*.4)
ESC SOLVE IRR= 6.75%
2. D)
CMPD;
N=25*12,
I=7.5,
PV=-500000*1.07^(10),
FV=0,
P/Y=12,
C/Y=1,
PMT= 7069
CMPD;
N=25*12,
I= 6.5,
PV=-500000*1.07^(10),
FV= 500000*1.07^10,
P/Y=12,
C/Y=1,
PMT= 5148.
Total annuity in the first 1st month=₹12217

Case Study - 6 (Roger)
Roger, aged 29 years, is working with a multinational company since December 2013. He has
approached you, a CFPCM practitioner, for preparing his Financial Plan. He is staying in his own house at
Ahmedabad. His wife Angela, aged 31 years, is a fashion designer. She has set up a boutique on rent
and earned a net profit of ₹ 5.5 lakh in the previous financial year.
They have a son, Mark of age 4 years, and a year old daughter, Stephanie. Roger is also supporting his
parents to the extent of ₹ 20,000 per month. They stay at their ancestral house at Surat.
The family’s monthly house hold expenses are ₹ 40,000 p.m. (excluding insurance premium and EMIs).
Roger normally gets 10% increase in his gross salary year-on-year in the beginning of every financial
year, apart from bonus. The bonus for the previous financial year at ₹ 3.3 lakh (net of tax) is agreed to
be credited to his account at the end of this month.
He has taken a family floater policy for Health Insurance involving an annual premium of ₹ 16,268 and
a total cover of ₹ 15 lakh.
Roger’s monthly salary (for FY2020-21):
DA (forming part of Salary) : 50% of Basic salary
Medical Reimbursement : Actual expenses up to
₹ 1,250 per month
Executive Allowance : ₹ 10,000
Couple’s Current Assets & Liabilities (As on 31st March, 2020)
Assets:
House : ₹ 75.00 lakh (Current market value,
purchase cost ₹ 40 lakh)
Car : ₹ 4.00 lakh (Depreciated value)
Public Provident Fund - PPF1 : ₹ 4.90 lakh
Insurance – Money Back policy2 : ₹ 3.00 lakh (Sum assured)
Child Plan – Life insurance3 : ₹ 12.00 lakh (Sum Assured)

Gold ornaments4 : ₹ 4.50 lakh
Equity Mutual Fund schemes5 : ₹ 7.85 lakh
1
Opened in December, 2014 in the name of Roger
2
Purchased on 25thOctober, 2016; annual premium paid ₹ 14,798; 20-year policy with 20% of sum
assured payable on survival on 5th, 10th and 15th years and the balance on maturity.
3
Purchased when Mark was 2 year old; term of 15 years; annual premium ₹ 41,374
4
Gifted on marriage in November 2014 at then value ₹ 1.75 lakh.
5
Three schemes; current assets value in one scheme is ₹ 2.5 lakh, in second ₹ 3.5 lakh with monthly
Systematic Investment Plan (SIP) of ₹ 10,000; the third is Equity Linked Saving scheme, invested ₹ 1
lakh in March 2018.
Portfolio of Equity Shares6 : ₹ 3.95 lakh
Bank fixed deposits7 : ₹ 4.00 lakh (Principal, in Angela’s

name from her business income)
Bank account – Roger : ₹ 0.75 lakh
Bank account – Angela : ₹ 0.95 lakh
Liabilities:
Home loan8 : ₹ 17.85 lakh (Principal outstanding)
Car Loan9 : ₹ 3.05 lakh (Principal outstanding)
Goals:
1. Accumulate in a fund, higher education expenses of Mark and Stephanie. Expenses at their
respective age of 18 years are ₹ 4 lakh p.a. (current cost) required for four years, cost escalation
8% p.a.
2. Marriage expenses of ₹ 10 lakh (current cost) for each child at around their respective age of 25
years, cost escalation 9% p.a.
3. Retirement corpus at Roger’s age of 58 years to sustain 70% of pre-retirement household
expenses, inflation adjusted, till his lifetime and 70% of then expenses till Angela’s expected life.
4. A bigger house valued at ₹ 1 crore today, 5 years from now by disposing of the current house and
foreclosing the loan.
5. Build a separate fund for vacation expenses of ₹ 1.5 lakh p.a. (current cost), first expenses to be
drawn after 5 years and thereafter every year continuing up to the year of Roger’s retirement, cost
escalation 7% p.a. A suitable lump sum is to be invested immediately followed by an investment
regime.

Life Parameters:
Roger’s Expected Life : 75 years

Angela’s Expected Life : 80 years
6
The Demat account in which Roger and Angela are respectively first and second holders was started
in 2016
7
Three deposits; ₹ 2 lakh made on 1st July 2017 for 3 years at 9.75% p.a., ₹ 1 lakh made on 1st July
2018 for 2 years at rate 9.25% p.a. and ₹ 1 Lakh made on 1st July 2019 for 1 year and 1 day at 8.75%
p.a.(interest is compounded quarterly and is cumulated to be received on respective maturities.)
8
Home loan of ₹ 24 lakh for a 15-year term taken in April, 2014 at rate of interest fixed for first 3 years
at 10% p.a., and floating thereafter at 1.5% above RBI Repo rate.
9
Car loan of ₹ 5.5 lakh taken in April, 2018 at a fixed interest of 11% p.a. for a 4-year term; Car cost ₹8
lakh.
Assumptions regarding pre-tax returns on various asset classes :

5) Gold & linked investments : 6.00% p.a.


2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 6 (Roger)
1) Before beginning work on Roger’s Financial Plan, you have drafted a document outlining the
“Scope of Engagement” and sought Roger to mutually define and determine the activities that
may be necessary to pursue. Roger asked you about relevance of such a document. In the context
of Financial Planning Profession, you explain about the “Letter of Engagement” as a .
[2 marks]
A) professional requirement under Code of Ethics of FPSB India
B) professional requirement under Practice Guidelines of FPSB India
C) necessary legal requirement as per Contract Act 1872
D) document for his personal record
2) You have finished analysis of Roger’s financial situation and risk profile. Which of the following is
the next appropriate step in the financial planning? [2 marks]
A) Specify financial goals which can be achieved within Roger’s financial situation based on the
information collected
B) Fix the scope of engagement based on the available information already collected
C) Consider such assumptions of investment returns, inflation, tax rates, etc as to maximize
the chances of achieving Roger’s goals
D) Identify other issues that may potentially impact Roger’s ability to achieve financial goals
3) Roger wants to estimate the amount of finance needed to buy the proposed new house after 5
yea₹ This could be arrived at by utilizing the net amount from the sale proceeds of his existing
house after 5 yea₹ The outgoings from such proceeds would be the outstanding loan amount and
a sum of ₹ 10 lakh towards meeting capital gains tax liability on existing house and the statutory
charges, furnishing expenses of new house. You expect the average Repo rate of 6.5% to be
maintained by RBI over the next 5 year [3 marks]
A) ₹ 75 lakh B) ₹60 lakh
C) ₹54 lakh D) ₹ 37 lakh

4) You give a quick look at the assets and liabilities of the couple, and before drawing a
comprehensive picture of adequate insurance protection and a strategy to achieve the same, you
suggest to take cover on an immediate basis, which is . [2 marks]
A) They must take Mortgage Redemption Insurance or an equivalent term insurance to cover
outstanding loans
B) They must take Accident Insurance
C) They must take Critical illness insurance
D) They must take Unit Linked Insurance Policies for their financial goals
5) You compute the value of additional life cover for Roger by considering 80% of the current
household expenses, (inflation adjusted) up to Angela’s age of 55 years and further 80% of then
expenses inflation-linked for the remaining period of her expected life by considering investment
in debt MF schemes. This cover required to be taken as term insurance exclusive of the sum
assured under current insurance policies comes to . [3 marks]
A) ₹ 120 lakh B) ₹ 135 lakh
C) ₹ 220 lakh D) ₹ 105 lakh
6) Roger’s ideal life cover has to be estimated which in case of any exigency will first repay the
outstanding loans and the remaining would be invested along with the couple’s existing financial
assets. Such combined corpus would be invested in a 7.5% p.a. return instrument to sustain the
family’s living expenses and the specific financial goals of higher education of their children. The
living expenses need to be taken as inflation-adjusted to the extent of 80% of their present
household expenses for 50 year. What should be this ideal cover? [4 marks]
A) ₹ 147 lakh B) ₹ 165 lakh
C) ₹ 180 lakh D) ₹ 230 lakh
7) Roger and Angela wish their retirement corpus, as per proposed goal, to also have a provision of
gifting ₹ 50 lakh to each of their children and an additional ₹ 25 lakh towards charity to an Old
Age Home at Roger’s age of 70 year. The sums are at absolute values then. They also wish to
provide in the corpus an additional ₹ 10,000 per month (current costs) towards healthcare after
Roger’s age of 70 year. You estimate the required corpus, considering the same shall be invested
in investment yielding 6.5% p.a., to be . [3 marks]
A) ₹ 3.53 crore B) ₹ 3.20 crore
C) ₹ 3.78 crore D) ₹ 3.67 crore

8) You sensitize on the post-retirement parameters considered as: investment return 6.5% p.a.,
inflation 5% p.a., and the specified longevity as you work out retirement corpus. You stress test
the same as: investment return 6% p.a., inflation 5.5% p.a., increased longevity of Roger by 5
years and of Angela by 2 years, and no further curtailment after Roger’s death. You work out the
revised corpus. What additional funds need to be accumulated by Roger’s retirement age?
Alternately, by what percentage the retirement expenses should be curtailed to retain this
cushion? [5 marks]
A) ₹ 57 lakh; 44% curtailment B) ₹ 14 lakh; 33% curtailment
C) ₹ 129 lakh; 55% curtailment D) ₹ 26 lakh; 36% curtailment
09) You inform Roger and Angela about the recent vehicle of taking exposure to Gold, which is
Sovereign Gold Bonds (SGB). Which of the attributes about the SGB is CORRECT? [2 marks]
A) The Capital Gains on redeeming these bonds on maturity are exempt from income tax
B) They work like zero-coupon bonds
C) The quoted prices of SGBs currently are very close to ruling Gold prices
D) The redemption price on maturity is guaranteed not to be below the issue price of the
respective SGB
10) Towards the marriage goal of the children, you suggest Roger to make maximum permissible
subscriptions to his PPF account towards the end of every financial year and extend the account
twice beyond initial maturity for terms of 5 years each with similar subscriptions. The third term of
5 years is continued without further contribution. Roger shall withdraw about 50% of
accumulation for the marriage expenses of mark and the remaining for the marriage expenses of
Stephanie. What are the expected individual withdrawals and shortfalls in meeting the marriage
expenses? [4 marks]
A) Mark ₹ 51.5 lakh, 16% shortfall; Stephanie ₹ 64.8 lakh, 18% shortfall
B) Mark ₹ 47.7 lakh, 22% shortfall; Stephanie ₹ 59.7 lakh, 24.5% shortfall
C) Mark ₹ 52.3 lakh, 14% shortfall; Stephanie ₹ 65.9 lakh, 17% shortfall
D) Mark ₹ 45 lakh, 26% shortfall; Stephanie ₹ 56.7 lakh, 28% shortfall
11) Roger and Angela will set aside immediately a sum of ₹ 10 lakh towards setting up a fund for
vacation. They will start contributing annual investments beginning April 2021 till Roger’s age of
55. The annual investment will be doubled after 14 such investments. You devise an asset
allocation for the vacation fund to yield 11% p.a. for the first 15 years and 9.5% p.a. thereafter.
What should be the amount of initial annual investment? [5 marks]

A) ₹ 1,75,500 B) ₹ 1,23,600
C) ₹ 97,900 D) ₹ 1,15,300
12) For the higher education expenses for Mark and Stephanie, Roger starts accumulating funds with
monthly investment of ₹ 20,000 in an aggressive asset allocation yielding 12% p.a. After 7 years
the allocation is moderated to yield 10% p.a. and while the investment is raised to ₹ 40,000 p.m.
After 12 years, the funds accumulated are shifted to suitable debt instruments from which
distribution towards higher education is made as proposed. What excess/shortfall of funds you
expect after 12 years by following this investment strategy? [5 marks]
A) Shortfall ₹28.16 lakh B) Shortfall₹10.12 lakh
C) Excess ₹ 7.60 lakh D) Excess ₹ 12.48 lakh
13) Roger asks for your guidance regarding different modes of tax efficient estate planning which can
help in creating and distributing family assets. You opine that a Trust would be a more
appropriate option because . [2 marks]
A) there is no taxation applicable on trust income
B) they have fixed rate of tax which is far lower than tax rates for individual assessees
C) future capital gains tax on assets transferred to trust could be lower
D) all future earnings from assets transferred to trust are exempt
14) Roger invested ₹ 4 lakh on 20th September 2019 in an Equity Mutual Fund scheme at NAV of ₹
28.273 per unit. The scheme declared dividend of ₹ 5 per unit, the Record Date being 4th
December 2019. The prevailing NAV of the scheme is ₹ 22.367 per unit. If he sells all the units of
the scheme today, what would be the implication of this transaction in his IT return of AY 2021-
22? [3 marks]
A) ₹12,818 short term capital loss to be set off against capital gains in AY 2021-22 or carried in 8
subsequent years
B) ₹83,557 short term capital loss to be set off against capital gains in AY 2021-22 only
C) ₹83,557 short term capital loss to be set off against capital gains in AY 2021-22 or carried in 8
subsequent years
D) ₹12,818 short term capital loss to be set off against capital gains in AY 2021-22 only

15) Roger wants to invest the maturity proceeds of all his fixed deposit investments in the 2.50 %-
SGB (Sovereign Gold Bonds) of a series quoted at ₹ 2,660 per bond, at a discount of 7.3% to their
issue price (issue date: 18-July-2019). Roger wishes to hold SGBs till maturity. Calculate the
impact of taxation in the AY2021-22in respect of these transactions if the SGBs could be bought
at the quoted rate when FDs mature. Also evaluate capital gains on maturity in the 8-year tenure
of these SGBs, if on maturity Gold price in its purest form is expected at ₹ 4,000 per gram. (CII
expected in the year of maturity may be considered as 348). [5 marks]
A) ₹1,31,556 "Income from Other Sources" in AY2021-22; Capital gains of 1,14,030 on maturity
B) ₹1,31,556 "Income from Other Sources" in AY2021-22; Capital gains on maturity shall be tax-
exempt
C) ₹24,745 "Income from Other Sources" in AY2021-22; Capital gains on maturity shall be tax-
exempt
D) ₹29,477 "Income from Other Sources" in AY2021-22; Capital gains of 1,37,853 on maturity

Solutions
Q1 B) professional requirement under Practice Guidelines of FPSB India

Q2 D) Identify other issues that may potentially impact Roger’s ability to achieve financial goals
Q3 C) ₹ 54 lakh (approx.)
Current value of the desired house ₹10,000,000
Expected value of new house after 5 years considering ₹13,700,867
6.5% appreciation ₹ 10000000*(1+6.5%)^5
Existing market value of the occupied house 7,500,000 years
Expected market value in five years considering ₹10,275,650 p.a.
6.5% appreciation 7500000*(1+6.5%)^5
Loan outstanding on existing home to be settled
Principal value of 15-year loan (availed in April 2014) ₹2,400,000
EMI considering 10% p.a. interest for first three years ₹25,791p.m.
PMT(10%/12,15*12,-2400000,0,0)
Loan outstanding as at end March, 2017 ₹2,158,061
PV(10%/12,(15-3)*12,-25791,0,0)
The average rate on loan 1.5% above the Repo rate 8.00%p.a.
of 6.5%
Revised EMI (average) over the next 8 years ₹23,360p.m.
(3 years till Mar’19 + 5 years until sold) PMT (8%/12,(15-3)*12,-2158061,0,0)
Loan outstanding as at end March, 2025 (five ₹956,870
years from today) PV(8%/12,(15-3-3-5)*12,-23360,0,0)
Amount to be set aside for tax liability, duties ₹1,000,000
and furnishing
Amount that can be utilized from sale proceeds to ₹8,318,780
buy new house (10275650-956870-1000000)
Amount to be financed for new house ₹5,382,087
(13700867-8318780)

Q4 A) They must take Mortgage Redemption Insurance or an equivalent term insurance to cover
outstanding loans
Q5 D) ₹ 105 lakh (approx.)

Current household expenses 40,000 ₹ p.m.
Annual expenses in current terms 480,000 ₹ p.a.
Inflation rate 5.00% p.a.
Return on Debt MF schemes 7.50% p.a.
Current age of Angela 31 years
PV of 80% of current expenses required till Angela's ₹7,124,721
age of 55 years PV((1+7.5%)/(1+5%)-1,55-31,-
480000*80%,0,1)
Household expenses (80% of current) in the 1,238,438
55th year of Angela ₹ 480000*80%*(1+5%)^(55-31)
PV at Angela's age of 55, of 80% of then living ₹18,945,605
expenses for remaining 25 years PV((1+7.5%)/(1+5%)-1,80-55,-
1238438*80%,0,1)
PV of post-55 years expenses today ₹3,339,684
(income stream drawn from debt funds) 18945605/(1+7.5%)^(55-31)
Life cover required to the extent of covering living 10,464,405
expenses as proposed ₹7124721+3339684
(Approximate) ₹ 105 lakh
Q6 A) ₹ 147 lakh
Current expenses 480,000 p.a.
Rate of return to invest claim proceeds and other assets 7.50% p.a.
Inflation 5.00% p.a.
Living Expenses
80% of present expenses for the next 50 years 11,420,551₹(PV):1
PV((1+7.5%)/(1+5%)-1,50,-
480000*80%,0,1)

Higher Education Expenses
Mark: ₹ 4 lakh p.a. for 4 years required after 14 years 1,719,344 ₹ (PV):2
at 8% escalation PV((1+7.5%)/(1+8%)-1,4, -
400000*(1+8%)^14,0,1)/(1+7.5%)^14
Stephanie: ₹ 4 lakh p.a. for 4 years required after 17 1,743,447 ₹ (PV):3
years at 8% escalation PV((1+7.5%)/(1+8%)-1,4, -
400000*(1+8%)^17,0,1)/(1+7.5%)^17
Loans outstanding
Housing loan 1,785,000 ₹ (PV):4
Car loan 305,000 ₹ (PV):5
Total corpus required to meet the living and HE 16,973,342₹ (PV): 1 to 5
expenses and loans (PV:1 to 5) PV1+PV2+PV3+PV4+PV5
Financial Assets:
Cash in bank accounts and FDs ₹570,000
Equity shares and Equity MF scheme investments ₹1,180,000
PPF A/c balance ₹490,000
Total of Financial Assets ₹2,240,000
Therefore, Life cover needed at this stage for Roger ₹14,733,342
16973342-2090000
Q7 B) ₹ 3.20 crore (approx.)
Monthly household expenses ₹40,000 p.m.
Required Annual expenses in the first year after ₹1,383,022
retirement (age 58 of Roger) 12*40000*70%*(1+5%)^(58-29)
Rate at which corpus is invested 6.5% p.a.
Inflation 5.0% p.a.
PV of expenses required from Roger's age of 58 to 70 ₹15,369,121 (corpus: 1)
PV((1+6.5%)/(1+5%)-1,12,-1383022,0,1)
PV (on retirement) of Provision of Gifts and Charity at 5,871,036
age 70 ₹ (corpus:2) 12500000/(1+6.5%)^12

Additional ₹ 10,000 p.m. (current cost) at Roger's 73,920
age of 70 ₹ p.m. 10000*(1+5%)^(70-29)
Additional Annual expenses to be provided for medical 887,039
care at Roger's age of 70 ₹ 73920*12
Basic Household expenses at Roger's age of 70 2,483,708
₹ 1383022*(1+5%)^(70-58)
Total Annual expenses required at Roger's age of 70 3,370,747
₹ 887039+2483708
Corpus (at 70 of Roger) for expenses required from age 16,385,620
70 to 75 of Roger ₹ PV((1+6.5%)/(1+5%)-1,5,-
3370747,0,1)
PV of this sum (computed at Roger's age of 70) on 7,696,045
Roger's retirement (at age 58) ₹ (corpus:3)
16385620/(1+6.5%)^(70-58)
Expenses further curtailed to 70% for Angela (Roger 3,011,415
dies at 75, Angela survives at 77) ₹ 3370747*(1+5%)^5*70%
Corpus at Roger's age of 75 (death) for next three 8,907,600
years of Angela's survival# ₹ PV((1+6.5%)/(1+5%)-1,3,-
3011415,0,1)
Corpus (at 58) for expenses required at Roger's age 3,053,637
75 for Angela's survival ₹ (corpus:4)
8907600/(1+6.5%)^(75-58)
Total Corpus required at age 58 of Roger 31,989,838
₹ (corp 1 to 4)
#Angela (life exp. 80) survives Roger by
3 years
Q8 A) ₹ 57 lakh; 44% curtailment
Corpus worked out in the Initial Scenario:
Initial rate at which corpus is invested 6.5% p.a.
Initially assumed Inflation rate 5.0% p.a.
Current house hold expenses 480,000 ₹ p.a.

Household expenses budgeted for retirement after 1,383,022
29 yrs (Rogers' age 58) ₹ p.a. 480000*70%*(1+5%)^29
Age of Angela on Roger's retirement (Angela is senior 60 years by 2 years)
Life expectancy of Angela 80 years
Retirement corpus to last (out of which last 3 years 20 years
further reduced to 70%)
PV of expenses: Initial 17 years (till the survival of 21,039,890
Roger up to age 75, Angela 77) ₹ PV((1+6.5%)/(1+5%)-1,17,-
1383022,0,1)
PV of expenses: Balance 3 years (Angela's living 2,250,048
expenses from age 77 to 80) ₹PV((1+6.5%)/(1+5%)-1,3, -
1383022*70%*1.05^17,0,1)/
(1+6.5%)^17
Initially worked out corpus 23,289,939
₹ 21039890+2250048
Stress test: lower yield, higher inflation, increased longevity
Retirement corpus to last (Roger's 80 with now coincide 22 years
with Angela's 82) 80-58
Revised Yield from investing corpus 6.00% p.a.
Revised Rate of inflation 5.50% p.a.
Retirement corpus required 28,965,848
₹ PV((1+6%)/(1+5.5%)-1,22,-
1383022,0,1)
Cushion built in the corpus 5,675,909
₹ 28965848-23289939
Alternately, the reduction sought in post-retire expenses (2nd Scenario)
Required expenses to be withdrawn in the 1st year 1,112,016
after retirement 1383022*(23289939/28965848)
Pre-retirement expenses (at the given rate of inflation 1,975,745
up to retirement) 480000*(1+5%)^29
Curtailment in expenses 43.72%
1-(1112016/1975745)

Q9 C) The Capital Gains on redeeming these bonds on maturity are exempt from income tax
Q10 B)Mark ₹ 47.7 lakh, 22% shortfall; Stephanie ₹ 59.7 lakh, 24.5% shortfall
PPF account balance as on 31-March-2020 ₹490,000
Account's initial maturity (opened in Dec-2014) is 1-April-2030
Number of subscriptions from 31-Mar-2021 to 10
31-Mar-2030
Number of subscriptions from 31-Mar-2031 to 10
31-Mar-2040 (2 extensions)
Rate of interest assumed throughout 7.75% p.a.
Maximum subscription at the end of every financial ₹150,000
year (for 20 years)
Accumulated balance on 31-March-2040 (Mark's age ₹8,857,561
24, Stephanie' age 21) FV(7.75%,20,-150000,-490000,0)
The account is maintained without subscription for 5 more years
Accumulated balance on 31-Mar-2041 (Mark's ₹9,544,022
age 25 years) 8857561*(1+7.75%)
50% of accumulated amount withdrawn for Mark's ₹4,772,011
marriage expenses 9544022/2
Estimated expenses (current ₹ 10 lakh, escalating ₹6,108,808
by 9% p.a.) for Mark 1000000*(1+9%)^21
Shortfall in meeting Mark's marriage expenses 21.88%
1-(4772011/6108808)
Remaining amount in PPF accumulated till ₹5,969,710
31-Mar-2044: Stephanie's marriage (9544022/2)*(1+7.75%)^3
Estimated expenses (current ₹ 10 lakh, escalating ₹7,911,083
by 9% p.a.) for Stephanie
1000000*(1+9%)^24
Shortfall in meeting Stephanie's marriage expenses 24.54%
1-(5969710/7911083)
Q11 D) ₹ 115,300

The current cost of annual vacation (1-April-2020); ₹150,000
Roger's age 29
Cost escalation provisioned in the vacation expenses 7.00% p.a.
Lump sum invested on 1-April-2020 in the fund ₹1,000,000
(Roger's age 29)
Total annual investments from 1-April-2021 to 26 years
1-April-2046 (till Roger is 55)
Total withdrawals from 1-April-2025 to 1-April-2049 25 years
(till Roger is 58)
Total investment period (1-April-2020 to 1-April-2049) 29 years
Return expected from Asset allocation in the first 11.00% p.a.
15 years (Initial + 14 investments)
Return expected from Asset allocation in remaining 9.50% p.a.
period
Vacation Expenses enumerated
Vacation expenses to be first drawn after 5 year, ₹210,383
i.e. on 1-April-2025
PV of expenses (first 11 years, 1-Apr-2025 to ₹1,939,223
1-Apr-2035) drawn from 11% return PV((1+11%)/(1+7%)-1,11,-210383,0,1)
PV as on 1-April-2021 1,277,426₹ (PV:1)
1939223/(1+11%)^4
Likely vacation expenses on 1-April-2036 ₹442,825
150000*(1+7%)^16
PV of expenses (next 14 years, 1-Apr-2036 to ₹5,358,498
1-Apr-2049) drawn from 9.5% return PV((1+9.5%)/(1+7%)-1,14, -442825,0,1)
PV as on 1-April-2021 1,135,291₹ (PV:2)
5358498/((1+11%)^14*(1+9.5%))
Total PV of all vacations provisioned (Pv:1 to 2) ₹2,412,718
1277426+1135291
Accumulation:
Initial sum invested (1-April-2020) in the needed ₹1,000,000
fund for vacation
Accumulation of initial sum as on 1-April-2021₹ 1,110,000 (1000000*1.11)
Remaining amount to be provisioned by way of ₹1,302,718
annual investments 2412718-1000000
Let us assume that initial investment installment ₹100
(first 14) be
PV of first 14 investments of ₹ 100 from 1-Apr-2021 ₹774.99
to 1-Apr-2034 PV(11%,14,-100,0,1)
investments in the latter part, 12 annual investment ₹200
(from 1-Apr-2035 to 1-Apr-2046)
PV of next 12 investments of ₹ 200 from ₹354.83
1-Apr-2035 to 1-Apr-2046 PV(9.5%,12,-200,0,1)/(1+11%)^14
PV of all 26 Annual Investments as provisioned ₹1,129.81
774.99+354.83
Amount of Annual Investment equivalent to the ₹115,304
assumption of ₹ 100 (1302718/1129.81)*100
Q12 B) Shortfall₹ 10.12 lakh
Higher Edu. expenses, in current terms, of Mark
(age 4) at his age 18, 19, 20 & 21 ₹400,000 p.a.
Higher Edu. expenses, in current terms, of Stephanie ₹400,000 p.a.
(age 1) at her age 18, 19, 20, 21
Cost escalation for higher education expenses 8.00% p.a.
Expenses drawn from a fund invested in debt 7.50% p.a.
instruments at
Accumulation period through monthly investments 12 years
in Asset Allocation Fund
Present Value of Higher Education Expenses after 12 years
PV of Higher Edu. Expenses of Mark at his age of ₹4,732,399
18 (after 14 years) in Risk Free PV((1+7.5%)/(1+8%)-1,4,-
400000*(1+8%)^14,0,1)
PV of such expenses after 12 years when drawn from 4,095,099₹
PV:1 debt investments 4732399/(1+7.5%)^2

PV of Higher Edu. Exp. of Stephanie at her age of ₹5,961,460
18 (after 17 years) in Risk Free PV((1+7.5%)/(1+8%)-1,4,-
400000*(1+8%)^17,0,1)
PV of such expenses after 12 years when drawn from 4,152,506₹ PV:2
debt instruments 5961460/(1+7.5%)^5
Total PV of Higher Edu. Exp. After 12 years in Risk 8,247,605₹ PV:(1+2)
Free instruments 4095099+4152506
Accumulation
Aggressive Asset Allocation (year 1 to 7) 7 years
Return expectation (aggressive) 12.00% p.a.
Monthly investment ₹20,000
Accumulation in 7 years ₹2,576,027
FV((1+12%)^(1/12)-1,12*7,-20000,0,1)
Moderate Asset Allocation (year 8 to 12) 5 years
Return expectation (aggressive) 10.00% p.a.
Monthly investment ₹40,000
Accumulation in 12 years ₹7,235,587
FV((1+10%)^(1/12)-1,12*5,-40000,-
2576027,1)
Shortfall expected after 12 years ₹-1,012,018
7235587-8247605
Q13 C) future capital gains tax on assets transferred to trust could be lower
Q14 A) ₹ 12,818 short term capital loss to be set off against capital gains in AY 2021‐22 or carried in 8
subsequent years
Investment amount on 20‐Sep‐2019₹ 400,000
Investment made at a price ₹ 28.273
Units allotted 14,147.773units (400000/28.273)
Dividend received ₹ 5 per unit (RD 4‐Dec‐2019 is within
3 months of purchase date) 70,739 (14147.773*5)
Price prevailing today (1‐Apr‐2020) 22.367
Redemption proceeds (within 9 months of dividend) 316,443 (14147.773*22.367)
Short term Loss in the transaction (83,557) 316443‐400000

Under Section 94(7) dividend stripping applies in this case
Hence, short term capital loss allowable in AY 2021-22-12,818 (‐83557+70739)
Note: As per Section 94(7), dividend stripping is applicable only if:

1. Shares or MF units are bought within 3 months of dividend record date
2. Shares are sold within 3 months of dividend record date/MF units are sold within 9 months of
dividend record date
3. There is short term capital loss (STCL) on such sale
4. Dividend received is less than the STCL on sale
If it is applicable, the amount of dividend received is deducted from the total STCL figure for
shares/MF units sold. Balance will be either set‐off against capital gains, if any, or carried forward
to next assessment year.
Q15 C) ₹ 24,745 "Income from Other Sources" in AY2021-22; Capital gains on maturity shall be
tax‐exempt
As on 31‐Mar‐2020
Amount cumulated in ₹ 2 lakh, 3‐year fixed deposit made on ₹ 260,663
1‐Jul‐2017 @9.75% p.a.
200000*(1+9.75%/4)^11
1‐Jul‐2018 @9.25% p.a. 100000*(1+9.25%/4)^7
1‐Jul‐2019 @8.75% p.a. 100000*(1+8.75%/4)^3
Maturity proceeds to be received as on 1‐Jul‐2020

1‐Jul‐2017 @9.75% p.a. 200000*(1+9.75%/4)^12
1‐Jul‐2018 @9.25% p.a. 100000*(1+9.25%/4)^8
1‐Jul‐2019 @8.75% p.a. 100000*(1+8.75%/4)^4

Total maturity proceeds of Fixed Deposits ₹ 496,126
(267016+240137+109041)
Interest accrued and receivable in the FY20‐21₹ 11,402 496126‐
(260663+117355+106707)
Current Quoted price of SGB (issue date: 18‐July‐2019) ₹ 2,660
Number of SGBs to be bought at the quoted price 186.51 bonds(round-off 186)
Coupon to be received on bonds (half‐yearly on 18‐Jul'20 and 18‐Jan'21) 2.50% p.a.
Discount to issue price 7.30%
Face value per unit of SGB ₹ 2,869 2660/(1‐7.3%)
Face value of SGBs to be purchased ₹ 533,722 2869*186
interest to be received on bonds in the FY20‐21₹ 13,343 533722*2.5%
Total interest due to these transactions under 'Income from Other Sources' ₹ 24,745
11402+13343
Capital Gains on maturity of the SGBs in July 2027 shall be exempt from income tax

Case Study - 7 (Urvashi)
Ms. Urvashi, aged 34 years, is employed in a senior position in a Mumbai-based firm. She has a son
Suryansh aged 14 years and a daughterDhruvi aged 9 years. She is the sole guardian of her children
pursuant to her recent divorce. She is currently residing in a rented house.
Suryansh has just passed 8th standard while Dhruvi is studying in 3rd standard. She has approached
you, a CFPCM practitioner, for preparing a Financial Plan for her family. She has plans to retire early
from service at her age of 55 yea₹ She shares the following financial information with you:
Salary Income (2020-2021) Annual (₹ lakh)
Employer’s contribution to NPS : 2.50
HRA : 5.00
Other allowances and reimbursements : 3.00
Regular Outgoings: Monthly (₹)
Basic Household Expenses : 40,000
Services availed : 18,000
School Fees : 25,000
House Rent : 35,000
Power, Telecom & Fuel : 12,000
Car Loan EMI : 18,275
Outgoings towards investment and insurance: (₹)
Equity Mutual Fund17 : 25,000 (Systematic Investment Plan - SIP)
Debt Mutual Fund2 : 15,000 (Systematic Investment Plan - SIP)
Insurance Premium3 : 38,759
Health Insurance Premium4 : 27,631
1 Diversified open-ended growth equity schemes; started 3 years ago with initial investment of Rs. 1 lakh; monthly SIP
2 Long-term long duration debt schemes with growth option, started 2 years ago, initial investment of Rs. 1 lakh; monthly SIP
3 Total Cover Rs. 1.5 crore across three policies of Rs. 50 lakh each, all term plans having cover up to Urvashi’s age of 50, 53 and 58 year
respectively; annual premium

4 Total cover Rs. 20 lakh on two policies, one is floater Rs. 10 lakh cover, the other in Urvashi’s name; annual premium

Car Insurance Premium : 8,637
Assets: (Valued on 31st March, 2020) (₹ lakh)

Equity Mutual Fund schemes : 15.45
Debt Mutual Fund schemes : 5.79
Equity Shares in Demat Account : 23.92
Equity Linked Saving Scheme5 : 3.85

Public Provident Fund (PPF) A/c6 : 6.59
Gold & Diamond Jewellery : 10.75
Car7 : 4.50
Bank Account (Salary) : 3.82
Fixed Deposits8 : 6.00
Deposit with House Owner : 3.00
Liabilities: (Outstanding on 31st March, 2020) (₹ lakh)

Car loan : 5.70
You, in consultation with Urvashi, have crystallized the following financial goals, for which the strategy
is to be devised and presented to Urvashi:
1. Purchase a house in the next three years costing currently ₹ 1.25 crore; provide for own funds,
transfer and stamp duty expenses to the extent of 30% of market value
2. Create a pool account and manage the same to plan for basic education of both children till their
respective 18 years of age; current costs are ₹ 1.5 lakh p.a. till age 14 and ₹ 2 lakh p.a. thereafter
till age 18, such expenses escalate at 10% p.a.
3. Create a corpus for higher education of both children at their respective age of 18 years; ₹ 25
lakh is the outlay in current terms for each child, such costs escalate at 8% p.a.
4. Create a combined corpus for the professional courses to be pursued by children with current
outlay of ₹ 25 lakh each required at their respective age of 22 years, such costs escalating at 9%
p.a., such corpus sustaining till the marriage of both the children tentatively at their respective
age of 27 years; marriage costs at ₹ 20 lakh per marriage, escalating at 7% p.a.
5. Retirement Corpus for post-retirement income stream equivalent to 60% current expenses
arrived at by omitting rent, EMI and school fees and considering provisions for gifting a lump sum
₹ 1 crore to her children when Urvashi attains 75 years of age; a further provision of donating ₹ 1
crore posthumously to a charitable trust on reaching age 85.
6. Create a fund in 10 years for a family world tour at an estimated ₹ 10 lakh at current costs, such
costs escalating at 5% p.a.
Life Parameters:
Urvashi’s expected life currently estimated : 85 years

5
Invested ₹ 1 lakh in each of the previous three financial years in March every year
6
Account opened on 21st December 2012
7
Purchased on 1st March 2017 by availing a loan for ₹ 10 lakh (80% loan to value, 6-year, 9.5% p.a.)
8
Six Fixed Deposits each of ₹ 1 lakh at 7.75% p.a. interest, maturing on 1st date of months from April
to September 2020, all deposits created from 15th September 2018 to 20th October 2018 on weekly
intervals

5) Gold & linked instruments : 6.00% p.a.


2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 7 (Urvashi)
1) Urvashi asks if you can show her the actual financial plan made of another client. Under which of
the following Code of Ethics you are prohibited to reveal one client’s details to other. [2 marks]
A) Code of Ethics of Professionalism B) Code of Ethics of Fairness
C) Code of Ethics of Confidentiality D) Code of Ethics of Integrity
2) You have just defined and discussed with Urvashi the basic terms of the financial plan
construction. As per Financial Planner Practice Standards, what should be your next logical step?
[2 marks]
A) To inform Urvashi about the terms of the engagement
B) To collect the quantitative and qualitative information of Urvashi
C) To define the financial goal of Urvashi
D) To apprise Urvashi of your expertise in certain areas to elicit her goals accordingly
3) Urvashi wishes to avail housing loan to the extent of 70% of the value of the desired house in the
next 3 years. She wants to fully repay the loan by the time she intends to retire. You consider
8.5% p.a. as the average interest rate on the housing loan to be availed. She asks you by how
much EMI on the loan would exceed her current monthly outgo towards house rent. [3 marks]
A) ₹ 103,653 B) ₹ 44,228
C) ₹ 56,353 D) ₹ 60,703
4) Looking at Urvashi’s various insurance policies and the coverage they provide, what is the most
appropriate conclusion from the following? [2 marks]
A) Urvashi needs to take cover against disability and critical illness as she is the only earner in
the family; other risks are well covered.
B) Urvashi has to take personal accident cover which is required as she drives her own car.
C) Urvashi’s life cover falls drastically after 53 years of age, she needs additional coverage till
60 years of her age.
D) Urvashi needs comprehensive householder policy considering that she is single parent, is
employed and is with small children.

5) Urvashi wants to create a Trust that would receive a corpus, in case of any eventuality with
Urvashi’s life, towards a ₹100 lakh house to accommodate both children and their living expenses
currently estimated at annual ₹ 9 lakh till Dhruvi attains 27 years of age. The expenses are
supposed to be drawn from debt instruments. Estimate additional insurance cover to achieve
thus. [3 marks]
A) ₹ 36 lakh B) ₹ 84 lakh
C) ₹ 180 lakh D) ₹ 5 lakh
6) Urvashi’s net contribution to family in the year 2018-19 would be after an estimated tax of ₹ 7.5
lakh and 25% of such post-tax income on own consumption. This contribution is expected to
increase at 5% p.a. in her service tenure. You estimate Urvashi’s income replacement considering
investment yield of 8.5% p.a. What additional life cover would be needed? [4 marks]
A) ₹ 1.16 crore B) ₹ 52 lakh
C) ₹ 1.90 crore D) ₹ 1.45 crore
7) Urvashi’s retirement corpus is arrived at by considering current household expenses, services

availed, power, telecom and fuel at her life expectancy. The investment yield at 7.5% p.a. and
average inflation at 5% p.a. is considered. On a conservative note, at investment yield of 6.5%
p.a. and 5 more years of expected life, what curtailment of expenses in the first year of
retirement would be needed? [3 marks]
A) 22% curtailment B) 12% curtailment
C) 14% curtailment D) 10% curtailment
8) Urvashi’s retirement corpus as per goal needs to be accumulated by utilizing the Demat account
holding along with a separate asset allocation fund. She will invest 70:30 in Equity: Debt for 10
years in this fund by beginning immediately a monthly SIP. After 10 years, the accumulated
amount in asset allocation fund and the subsequent monthly investments are rebalanced 40:60 in
Equity: Debt for the next 6 yea₹ After initial 16 years, the accumulations in asset allocation fund
along with Demat account holdings are redeemed and transferred to a designated retirement
fund yielding 6.5% p.a. The quantum of monthly investments maintained in the initial 16 years
shall be doubled in the last 5 years, that is, up to retirement. This retirement fund is used for
drawing expenses post-retirement. What quantum of initial monthly investment is required?
[5 marks]

A) ₹ 30,500 B) ₹ 63,200
C) ₹ 29,310 D) ₹32,100
9) Urvashi has recently heard about Inflation Indexed Bonds (IIB). She is not convinced about the
real annual yield of just 1.5% in a recently issued IIB. You explain the features of such Bonds as
. [2 marks]
A) The principal amount is protected on maturity, and is repaid inflation adjusted. The annual
coupons would be 1.5% of such periodically adjusted principal amount in tune with inflation
index.
B) The principal amount would be repaid on maturity just like other bond issues. The annual
coupons would be paid at annual inflation rate plus 1.5%.
C) The inflation adjusted principal would be repaid on maturity. The annual coupons however
would be 1.5% of the face value of the bond.
D) The principal amount would be repaid on maturity just like other bond issues. The annual
coupons would be 1.5% above the cumulative percentage rise in inflation index measured
annually.
10) For accumulating funds for the goal of world tour, you suggest investing the maturity proceeds of
each of the bank fixed deposit on the respective maturity dates in an asset allocation fund. The
accumulated amount from this fund is switched to Risk free instruments three years prior to the
actual usage for the purpose. What return needs to be generated from the asset allocation fund
to achieve the goal? [4 marks]
A) 11% p.a. B) 7.5% p.a.
C) 13.25% p.a. D) 14.6% p.a.
11) Urvashi utilizes fund in her PPF account for creating a combined corpus to meet the professional
course expenses of Dhruvi and later to meet her marriage expenses. She would invest ₹ 1.5 lakh
in the beginning of every financial year, starting immediately, in the PPF account and extend the
account for a term of 5 years with the same discipline of investment. A lump sum equivalent to
50% of the professional course charges then is withdrawn from the PPF account after which it is
extended for one more term of 5 years without further contributions. What percentage of sum
required for Dhruvi’s marriage would be available on the final maturity of the account? [5 marks]
A) 57% B) 28%
C) 45% D) 71%

12) The cash flows required for the basic and higher education expenses of her children are managed
in a pool account of existing equity and debt MF schemes. They have current year provisions. You
advise to switch today suitable lump sum from Equity to Debt schemes so that Debt schemes
withdrawal on yearly basis is enough to meet next 3 instalments of basic education expenses of
Suryansh and Dhruvi. After 4 years, you again switch from Equity to Debt schemes funds
equivalent to Dhruvi’s remaining years’ basic education expenses. You utilize the remaining
balance in Equity schemes to meet in one lump sum Suryansh’s higher education expenses.
Consider expenses required for a year to be withdrawn at the beginning of the year. What
incremental SIP in Equity MF schemes needs to be started immediately to ensure this strategy
works? [5 marks]
A) ₹ 12,860 per month B) ₹19.050 per month
C) ₹ 16,270 per month D) ₹ 15,120 per month
13) Urvashi, in case of her life contingency, is apprehensive about managing the affairs of her
children. You advise her to set up a common Minor Beneficiary Trust for Suryansh and Dhruvi.
You put forth the argument in favour as: [5 marks]
A) Such a Trust shall protect assets transferred and shall manage them as per guidelines
issued to the trustee until either or both of her children reach/es a specified age to be
defined by Urvashi
B) Such a Trust shall protect and manage assets for her children only until they individually
reach majority, i.e. 18 years of age
C) Such a Trust shall not take further resources/assets/inheritances once the benefits have
been transferred to it and the guidelines specified by Urvashi for their use
D) Such a Trust shall strictly prevent early distribution of assets before both Suryansh and
Dhruvi attain majority, i.e. 18 years of age
14) Urvashi has decided to sell gold jewellery worth ₹ 11 lakh in April 2020. This was acquired for ₹
2.15 lakh in FY 2006-07. She wishes to invest the proceeds of such sale after deducting tax in
2.50%-SGB (Sovereign Gold Bonds). These SGBs quote at ₹ 2,800 per bond, at a discount of 8.5%
to their issue price (issue date: 28-June-2019). How these legs of transactions will reflect in her IT
Return for AY2021-22? [3 marks]
A) Long term capital gains of ₹ 5,63,486 ; Income from other sources ₹ 26,852
B) Long term capital gains of ₹ 5,63,486 ; Income from other sources ₹ 30,055
C) Long term capital gains of ₹ 8,68,932 ; Income from other sources ₹ 26,820
D) Long term capital gains of ₹ 5,82,478 ; Income from other sources ₹ 28,414

15) Urvashi contributes 10% of her Basic Salary to the National Pension System (NPS) Tier 1 account.
Her employer also matches this contribution as 10% of her Basic Salary. She additionally
contributes every year ₹ 50,000 in NPS Tier 2 account. Consider the interest on Savings Bank
Account as ₹ 20,000 and that on Fixed Deposit as ₹ 25,000 during FY 2020-21. She intends to
immediately buy Sovereign Gold Bonds (SGB) units for ₹ 10 lakh in a 2.5%-SGB series (issued in
June 2018, with coupons payable half-yearly in June and December). The SGBs currently quote at
₹ 2,800 per unit, at a discount of 8.5% to its issued price. Calculate her income tax liability for AY
2021-22. [5 marks]
A) ₹ 6,46,520 B) ₹ 7,15,200
C) ₹ 6,85,150 D) ₹ 7,46,510

Solutions
Q1 C) Code of Ethics of Confidentiality

Q2 B) To collect the quantitative and qualitative information of Urvashi
Q3 D) ₹ 60,703
Current value of the desired house ₹12,500,000
Expected value of house after 3 years considering ₹15,099,370
6.5% appreciation 12500000*(1+6.5%)^3
Amount of loan to be availed ₹10,569,559
15,099,370*70%
Tenure of loan = (Urvashi's retirement age - age 18 years
when loan availed) 55-37
Rate of interest on housing loan 8.50% p.a.
EMI on the housing loan ₹95,703
PMT(8.5%/12,18*12,-10569559,0,0)
Current rental outgo 35,000 ₹ p.m.
EMI in excess of current house rent 60,703₹ p.m.
95703-35000
Q4 A) Urvashi needs to take cover against disability and critical illness as she is the only earner in the
family; other risks are well covered.
Q5 B) ₹84 lakh
Annual Living expenses required in current terms 9,00,000 ₹ p.a.
Inflation rate 5.00% p.a.
Return on risk free instruments 7.50% p.a.
Current age of Dhruvi 9 years
No. of years expenses required (till 27 years of 18 years
age of Dhruvi)

Corpus required today towards living expense ₹13,362,370
provisioned PV((1+7.5%)/(1+5%)-1,18,-900000,0,1)
Funds required to purchase a house ₹10,000,000
Total Corpus for living expenses and house ₹23,362,370
13362370+10000000
Current insurance cover ₹15,000,000
Additional insurance cover required ₹8,362,370
23362370-15000000
Q6 D) ₹ 1.45 crore
Urvashi's salary gross per annum ₹3,300,000
Tax incidence ₹750,000
Net income in the current year ₹2,550,000
3300000-750000
Income contribution to the family ₹1,912,500
(25% self-consumption) 2550000*(1-25%)
Remaining work life (retiring at 55, current age 34) 21 years
Investment Yield 8.50% p.a.
Expected rate of increase in salary 5.00% p.a.
Present value of future income 29,508,239 PV
PV((1+8.5%)/(1+5%)-1,21,-1912500,0,1)
Sum Assured under current term insurance ₹15,000,000
Shortfall in insurance cover ₹14,508,239
29508239-15000000
(Approximate) ₹ 1.45 crore
Q7 A) 22% curtailment
Urvashi's current Age 34 yrs
Urvashi's retirement Age 55 yrs
Urvashi's Life expectancy 85 yrs

Current expenses for heads considered for retirement 840,000 ₹ p.a.
Inflation expected pre-retirement 5.00% p.a.
Expenses estimated at retirement 2,340,209 ₹ p.a.
840000*(1+5%)^(55-34)
Retirement corpus calculated in the 1st calculation:

Rate of return expected 7.50% p.a.
Inflation expected post-retirement 5.00% p.a.
Period for which money would be needed in 30 yrs
first calculation 85-55
Retirement corpus ₹50,952,803
PV((1+7.5%)/(1+5%)-1,30,-2340209,0,1)
Retirement corpus calculated in the 2nd calculation:
Rate of return expected 6.50% p.a.
Inflation expected post-retirement 5.00% p.a.
Period for which money would be needed in 35 yrs
2nd calculation 85-55+5
Retirement corpus ₹65,019,662
PV((1+6.5%)/(1+5%)-1,35,-2340209,0,1)
Curtailment of expenses required on retirement 22% ((1-(50952803/65019662)) 22%
Q8 C) ₹ 29,310
Current expenses for heads considered for retirement 840,000 ₹ p.a.
Inflation expected throughout 5.00% p.a.
Urvashi's working years (retirement at 55, 21 yrs
current age 34)
Living expenses needed on retirement 1,404,125 ₹ p.a.
(60% of pre-retirement) 840000*60%*(1+5%)^21
No. of years retirement income stream required 30 yrs
(up to age 85)
Yield of designated retirement fund post retirement 6.50% p.a.

Retirement Corpus estimation:
Required Corpus for living expenses at age 55 years 34,551,813 ₹ PV:1
PV((1+6.5%)/(1+5%)-1,30,-1404125,0,1)
₹ 1 crore (gifts) provisioned in the corpus needed 2,837,970 ₹ PV:2
20 years later 10000000/(1+6.5%)^20
₹ 1 crore (charity) provisioned in the corpus needed 1,511,861 ₹ PV:3
30 years later 10000000/(1+6.5%)^30
Total Corpus needed to be accumulated 38,901,644 ₹ (PV:1+2+3) 3
Suppose, a total monthly amount of ₹ 100 is invested in the asset allocation of equity and debt
components cumulatively
Accumulation to meet the Retirement Corpus:
Demat account Equity Shares: Current balance 2,392,000
Accumulation in 16 years, 5 years to retirement ₹12,703,659
(considering 11% p.a. in first 5 yrs) 2392000*(1+11%)^16
Accumulation of this up to retirement (next 5 years) ₹17,405,114
in 6.5% yield fund 12703659*(1+6.5%)^5
Balance to be accumulated through Asset Allocation
Fund up to 50 years ₹21,496,530
38901644-17405114
First Five years: Asset Allocation
Equity Returns 11.00% p.a.
Debt returns 7.50% p.a.
Equity investment per month 70 ₹ p.m.
Debt investment per month 30 ₹ p.m.
Equity component accumulation in 10 years ₹14,870
FV((1+11%)^(1/12)-1,10*12,-70,0,1)
Debt component accumulation in 5 years ₹5,298
FV((1+7.5%)^(1/12)-1,10*12,-30,0,1)
Total accumulation in asset allocation after 5 years ₹20,168
14870+5298
Next six years: Rebalanced Asset Allocation

Rebalanced Equity component accumulated (40%) ₹8,067
20168*40/100
Rebalanced Debt component accumulated (60%) ₹12,101
20168*60/100
Revised Equity investment per month 40 ₹ p.m.
Revised Debt investment per month 60 ₹ p.m.
Equity component accumulation in total 16 years ₹19,110
FV((1+11%)^(1/12)-1,6*12,-40,-
8067,1)
Debt component accumulation in total 16 years ₹24,100
FV((1+7.5%)^(1/12)-1,6*12,-60,-12101,1)
Total accumulation in asset allocation (in 16 yrs) ₹43,210
19110+24100
Last Five years: 6.5% p.a. Yield Retirement Fund
Monthly investment (doubled) 200 ₹ p.m.
Investment accumulated up to retirement ₹73,342
FV((1+6.5%)^(1/12)-1,5*12,-200,-
43210,1)
Actual monthly investment equivalent to ₹ 100 ₹29,310
(21496530/73342)*100
Q9 A) The principal amount is protected on maturity, and is repaid inflation adjusted. The annual
coupons would be 1.5% of such periodically adjusted principal amount in tune with inflation
index.
Q10 A) 11% p.a.
Current cost of world tour vacation ₹1,000,000
Cost escalation for such vacation 5.00% p.a.
Vacation fund required when due in 10 years ₹1,628,895
1000000*(1+5%)^10
Expected date when vacation fund is to be utilized 1-Apr-2027
Date of switch from the asset allocation fund to risk free 1-Apr-2025
instruments
Rate of return from risk free instruments 5.50% p.a.

Required value in asset allocation fund before ₹1,387,189
switch to risk free (3 years prior) 1628895/(1+5.50%)^3
This is to be accumulated until 1-Apr-2027 by investing ₹ 1.05 lakh in 6 installments on
1-Apr-2019, 1-May-2019, ----------- , 1-Sep-2019.
The return to be obtained in asset allocation fund is calculated by finding xirr
1-Apr-20 -105,000
1-May-20 -105,000
1-Jun-20 -105,000
1-Jul-20 -105,000
1-Aug-20 -105,000
1-Sep-20 -105,000
1-Apr-27 1,387,189
11% XIRR(C125:C131,B125:B131)
Q11 B) 28%
PPF account is opened on 21-Dec-2010
Initial maturity of PPF account due on 31-Mar-2026
15 years from close of FY in
which a/c opened
PPF account balance as on 31-Mar-2020 ₹659,000
Amount to be invested on 1st April every year ₹150,000
(beginning 1-Apr-2020)
Rate of interest (expected in the long term) on PPF 7.75% p.a.
account
Accumulated amount on initial maturity (31-Mar-2028) ₹2,901,052
FV(7.75%,8,-150000,-659000,1)
Current age of Dhruvi (on 1-Apr-2020) 9 years
Funds for professional course required (on 1-Apr-2033) 22 years
1st extended 5-year term
(from 1-Apr-2028 to 31-Mar-2033)
Maturity on 31-Mar-2033 after the 1st extended term ₹5,156,963
with similar investments FV(7.75%,5,-150000,-2901052,1)

Current cost of professional course ₹2,500,000
Cost escalation for professional course expenses 9% p.a.
Estimated outlay for professional course when due ₹7,664,512
(in 13 years) 2500000*(1+9%)^13
A sum equivalent to 50% of required amount ₹3,832,256
withdrawn from PPF account 7664512/2
Remaining amount in PPF A/c. ₹1,324,707
5156963-3832256
PPF account extended for 5 more years without ₹1,924,005
further contribution, grows to 13424707*(1+7.75%)^5
Marriage age of Dhruvi (tentatively on 1-Apr-2037) 27 years
Current cost of marriage ₹2,000,000
Cost escalation for marriage expenses 7% p.a.
Estimated outlay for marriage when due (in 18 years) ₹6,759,865
2000000*(1+7%)^18
Funds available as a percentage of marriage cost then 28%
(1924005/6759865)*100%
Q12 A) ₹16,270 per month incremental SIP in Equity MF schemes
Escalation of ₹ 1.5 lakh and ₹ 2 lakh expenses 10% p.a.
Return from Debt schemes 7.5% p.a.
Return from Equity schemes 11% p.a.
Suryansh's current age is 14 years. After the current year expenses, the required expenses in the
3-year block would be ₹ 2 lakh p.a. for 3 years (age 15,16,17).
Dhruvi's current age is 9 years. After the current year expenses, the required expenses in the 3-
year block would be ₹ 1.5 lakh p.a. for 3 years (age 10,11,12).
PV of 3 year block expenses when they are due after ₹1,099,599
the current year in debt PV((1+7.5%)/(1+10%)-1,3,-
350000*(1+10%),0,1)/(1+7.5%)
Debt MF schemes value today ₹579,000
Required money to be switched from equity ₹520,599
schemes today 1099599-579000

Equity MF schemes value today (before switch) ₹1,545,000
Equity MF schemes value today (after switch) ₹1,024,401
1545000-520599
SIP amount in Equity schemes 25,000 ₹ p.m.
Accumulated value in equity schemes after 4 years ₹3,050,877
FV((1+11%)^(1/12)-1,4*12,-25000,-
1024401,1)
SIP amount in Debt schemes ₹15,000 p.m.
Accumulated value of SIP in debt schemes after 4 years ₹837,473
FV((1+7.5%)^(1/12)-1,4*12,-15000,0,1)
Funds required to be available after 4 years in Debt schemes for Dhruvi's remaining five years
basic education expenses (age 13,14,15,16,17)
Education expenses at age 13 of Dhruvi (after 4 years) ₹219,615
150000*(1+10%)^4
PV of expenses for Dhruvi's basic education at her age ₹1,240,980
14,15,16,17 @ ₹ 2 lakh p.a. in debt schemes PV((1+7.5%)/(1+10%)-1,4,-
after 4 years 200000*(1+10%)^5,0,1)/(1+7.5%)
The value of funds as assessed after 4 years for ₹1,460,595
Dhruvi's education 219615+1240980
Shortfall in Debt schemes after 4 years ₹623,122
1460595-837473
Funds remaining in equity schemes after effecting switch ₹ 2,427,755
to Debt after 4 years 3050877-623122
Funds required for Suryansh’s higher education expenses ₹3,401,222
after 4 years 2500000*(1+8%)^4
Shortfall in total funds available, which is needed to be ₹ 973,468
accumulated through incremental SIP in equity 3401222-2427755
Therefore, incremental SIP in equity schemes ₹ 16,270
((1+11%)^(1/12)‐1,48,0,973468, 1)
Q13 A) Such a Trust shall protect assets transferred and shall manage them as per guidelines issued to
the trustee until either or both of her children reach/es a specified age to be defined by Urvashi
Q14 C) ₹Long term capital gains of ₹ 5,68,932 ; Income from other sources ₹ 26,820

Purchase cost of jewellery in 2006‐07₹ 215,000
Sale proceeds in April 2020₹ 1,100,000
CII for 2006‐07122
CII for 2020‐21301
Indexed cost of acquisition 530450
[215000*(301/122)]
Long‐term capital gains 569550
(1100000‐530450)
LTCG Tax @20.8% 118466
(569550*20.8%)
Net of tax proceeds from sale of jewellery981534
(1100000‐118466)
Current quoted price of SGB 2,800
Coupon to be received on bonds (on half‐yearly basis in Jun'19 and Dec'19) 2.50%
Face value of SGB 3,060
[2800/(1‐8.5%)]
Number of SGBs to be bought 350.59
981662/2800
Interest to be received on bonds during 2020‐21 26,820
(350.59*3060*2.5%)
Taxation of these transactions in AY2021‐22
Long term capital gains of ₹ 5,68,932 ; Income from other sources ₹ 26,820
Q15 B) 7,15,200
Income under the head salaries:
Basic 2,500,000
HRA 500,000
Less: exempt (See Note 1) (170,000)
Other allowances 300,000
Employer's Contribution towards NPS (10% of Basic Salary) 250,000
Employer's Contribution towards NPS [Up to 10% of Basic Salary exempt (2500000*10%)
from tax under Sec 80CCD(2)]

Total Income under the head salaries 3,130,000
(2500000+500000-170000+300000+250000-250000)
Net Total Income under the head salaries after standard deduction i.e. 50000 3080000
3130000-50000)
(savings account up to ₹ 10000 exempt u/s. 80TTA) 0,000(20000-10000)
fixed deposits 25,000
Income from Sovereign Gold Bonds (See Note‐2) 27,311
357*3060*2.5%
Gross total income (GTI) 3,142,311
(3080000+10000+25000+27311)
Less: Deductions
u/s 80CCD(1) contribution NPS Tier-1 by urvashi, maximum exemption 1,500,00
u/s 80CCD(1B) contribution by Urvashi towards NPS upto ₹ 50000
u/s. 80D (restricted to maximum limit of ₹ 25,000) 25,000
Total deductions 225,000
Net Income 2,917,311
(3142311-225000)
Tax on net income:
up to ₹ 2,50,000 -
₹ 2,50,001 to ₹ 5,00,000 @ 5% 12,500 (500000-250000)*5%
₹ 5,00,001 to ₹ 10,00,000 @ 20% 100,000 (1000000-500000)*20%
₹ 10,00,001 and above @ 30% 575193 (2917311-1000000)*30%
Tax payable 687693 (12500+100000+575193)
Cess 27508 (687693*4%)
Total tax payable 715201 (687693+27508)
Rounded off 715200
Note‐1: House Rent Allowance exempted: Least of the following ‐
Allowance Received 500,000
Rent Paid ‐ 10% of salary 170,000

(35000*12)‐(10%*2500000)
50% of salary 1,250,000 (2500000*50%)
Note‐2: Amount to be invested 1,000,000

Current quoted price of SGB 2,800
Coupon to be received on bonds (on half‐yearly basis in Jun'19 and Dec'19) 2.50%
Face value of SGB 3,060 2800/(1‐8.5%)
Number of SGBs to be bought 357.14
983922/2800 357
Interest to be received on bonds during 2020‐2127,311 (357*3060*2.5%)

Case Study - 8 (Vijay Kumar)
Today is April1, 2021. Vijay Kumar, aged 30, life expectancy 75, is working with a leading Indian
corporate as a project manager for the last 7 years in Ahmadabad. He is presently staying in an
unfurnished accommodation provided by his employer. His wife, Khyati, aged 29, life expectancy
80, is a house wife. They have two children - Mayuresh (aged5years) and Manjesh (aged2years).
Vijay earned following monthly salary for the FY 2020 – 21:
1. Basic Salary Rs. 30,200

2. D.A (forming part of Salary) 50%ofbasicsalary
3. City Compensatory Allowance Rs. 300
4. Children Education Allowance Rs.200 per child
5. Transport allowance Rs.1,000
Further, Vijay shall also receive a performance bonus of Rs. 60,000 from his employer for this year.
Vijay has also been recently rewarded by his employer with a good number of ESOPs.
Vijay’s monthly expenditure for the FY 2020-21was:
Particulars Amount(inRs.)
Housing expenses (including traveling, holidays 21,000
And festivals)
Personal loan repayments 13,200
Total 34,200
In addition to this, Vijay Contributes to Employee Provident Fund Rs. 4,800 monthly and also pays
Rs. 23,900 annually as premium of his life insurance policies, which consist of 3 endowment policies
and 1 unit linked policy. The total life insurance cover under his bouquet of policies is Rs. 12,00,000.
Vijay and his family are also insured for their medical expenses under his company’s medical claim
policy.

Assets of Vijay
Particulars Amount (in Rs.)
Plot of land (at native place) Present Market Value 2,00,000

ESOPs Present Market Value 16,00,000
Equity Shares Present Market Value 26,000
Equity Mutual Funds Present Market Value 80,000
Employees' Provident Fund Present Value 2,22,000
Public Provident Fund Present Value 12,000
Cash balance Present Value 10,000
Maturity Value on
Post Office NSC 32,500
31/03/2023
Vijay currently has Rs. 4,80,000 outstanding towards his personal loan balance, for which the EMIs
have been included in his current expense structure.
Vijay's parents have retired from Government jobs. They are financially well off and are not
dependent on him. At present they are residing in their own house in Bhuj, which is in the name of
his father, Dhananjay Kumar. This house was bought by Dhananjay in Sep 1999, the current market
value of which is Rs. 12 lakh. They also have another house in the same city which is in the name of
his mother, Jyoti Kumar. This house was bought by Jyoti in Aug 2009, the current market value of
which is Rs. 9 lakh. They are getting a monthly rent of Rs. 3,000 from this house.
With additions to his family, Vijay intends to plan his finances and wants to achieve his financial goals
within their time horizons.
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 lump sum; presently valued at Rs. 3lakheach.
4. To make provision for children’s marriage expected at the end of 20 years and 25 years from
now; presently valued at Rs. 5 lakh each.
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=9% p.a.
4) Rate of return on Debt in 1 to 5 years=10%p.a.
5) Rate of return on Debt in less than 1 year=5% p.a.
6) Inflation=4% per year.
2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 8 (Vijay Kumar)
1) You have pointed out to Vijay that presently he is not a adequately covered under life
insurance. Considering that he meets an immediate unforeseen event Vijay would like to
provide his family an amount of Rs.6 lakh p.a., inflation linked, starting from 1 st Feb 2022, till
Khyati is alive. What approximate amount of life insurance should Vijay be covered for if the
proceeds of such a cover would be invested in long term debt and long term equity in the ratio
90:10. (4)
A) Rs.112 lakh B) Rs.109 lakh
C) Rs.106 lakh D) Rs.104 lakh
2) Vijay wants to invest yearly to achieve his goals for his children's higher education. For
accumulation of fund you recommend Vijay to invest in Debt and Equity in the ratio 20:80. If
Vijay starts investing from 1st of Feb 2022, what approximate amount should he set aside
every year to achieve his said goals. Assume Vijay maintains separate investment accounts for
Mayuresh and Manjesh and invests till they turn 21 years of age respectively. (4)
A) Rs.9,000 and Rs.8,000 respectively B) Rs.10,000 and Rs.7,000 respectively
C) Rs.8,000 and Rs.7,000 respectively D) Rs.10,000 and Rs.8,000 respectively
3) Compute the Value of Rent Free Accommodation for FY 2020-21 provided to Vijay assuming
the population of Ahmadabad city is more than 25 lakh (as per 2014 Census). Also assume the
accommodation is owned by Vijay's employer. (4)
A) Rs. 93,600 B) Rs. 91,800
C) Rs. 84,600 D) Rs. 82,800
4) Vijay has got an offer from his employer to buy a car for Rs. 1,50,000, which the employer had
bought for Rs.5,00,000 three years ago. What will be the value of fringe benefit which shall be
a taxable requisite in the hands of Vijay incase he buys the car? (3)
A) Rs. 75,000 B) Rs. 50,000
C) Rs.1,06,000 D) Nil
5) Vijay is a member of Employees' Pension Scheme. If Vijay decides to leave his present job at 32
years of age after 8 years of service what will happen to his existing Pension Scheme? (3)
A) He can either take withdrawal benefit or scheme certificate so that his 8 year service
can be added to any future service that he may put in, in any other covered
establishment.

B) He cannot take any withdrawal benefit immediately but can add it to any future service
that he may put in, in any other covered establishment.
C) He can either take withdrawal benefit or scheme certificate only on completion of 10
years of service.
D) He can take withdrawal benefit only.
6) As a CFP Certificant, which of the following will not be a correct interpretation of the Rules of
Conduct pertaining to the Code of Ethics of Diligence for you while dealing with Vijay? (2)
A) A sign if I can’t recommendation may be given orally, however confirmation must be
given in writing as soon as possible.
B) As a CFP Certificant, you are considered to be more knowledge able than Vijay and
hence may not need to explain the recommendation and basis in a manner that Vijay
may comprehend.
C) As a CFP Certificant, you shall enter into an engagement with Vijay only after securing
sufficient information to be satisfied that Vijay's needs and objectives warrant the
relationship.
D) As a CFP Certificant, you shall confirm in writing to Vijay where a subsequent instruction
given by him alters the financial strategy of his portfolio under your supervision.
7) Vijay wants to know whether he is eligible to withdraw from his Employees’ Provident Fund
for purchase of his new house. (2)
A) Yes, a she has been a member of the fund for more than 3 years.
B) No, a she has not been a member of the fund for more than 10 years.
C) Yes, a she has been a member of the fund for more than 5 years, and provided he
purchases the house in his own name or in his own name and in his wife’s name.
D) Yes, a she has been a member of the fund for more than 5 years, and provided he
purchases the house in his own name or in his wife’s name.
8) Vijay desires to retire at his age of 55. He intends to arrange for the present housing expenses
(inflation linked) after his retirement till Khyati's lifetime. For accumulation of retirement
corpus Vijay intends to start annual saving from 1st Feb 2022 with Rs. 35,000 in the first year,
and increasing the savings by 8% every year till one year before his retirement. Vijay also
estimates to receive Rs.20 lakh from his employer on his retirement. What surplus/shortfall
would be available with Vijay at the time of his retirement in such a situation? Assume Vijay’s
savings earns him a return of 10% p.a. throughout and investments during his post retirement
are also able to fetch similar returns. (4)
A) Short fall of Rs.4.75 lakh B) Surplus of Rs.2.20 lakh
C) Surplus of Rs.11.50 lakh D) Shortfall of Rs.17.75 lakh

9) Vijay bought an endowment plan for 35 years on 20 Dec 2015 for a sum assured of Rs. 3 lakh,
where in quarterly premium is Rs. 2,500. Quarterly premium due in December 2021 for this
policy was paid on06/01/2022. Vijay wants to know what amount of claim would be payable
to his nominee under the policy in case he dies today? Vested bonus under the policy is Rs.
1,20,000 including bonus declared after valuation on 31/03/2021. For calculation purposes
assume interim bonus paid to Vijay till his death shallbeRs.40 per thousand sum assured. (4)
A) Rs.4,32,000 B) Rs.4,24,500
C) Rs.4,37,000 D) Rs.4,34,500
10) Vijay plans to take a loan from a bank for purchasing a house in Ahmadabad. He wants to
know, against which type of mortgage do the banks normally lend home loan? (3)
A) Simple Mortgage B) Usufructuary Mortgage
C) English Mortgage D) Equitable Mortgage
11) Dhananjay wants to gift Rs.5 lakh (in cash) to Vijay to buy a house. Vijay wants to know how
this receipt will be treated in his hands from Income Tax perspective. (2)
A) Notaxto be paid by Vijaya sit is gifted to him to buy a house.
B) Notaxto be paid by Vijay as gift in cash from a father to son is tax free.
C) Entire receipt will be tax able in the hands of Vijay as it is received in cash.
D) Entire receipt will be taxable in the hands of Vijay as it is more than Rs.50,000.
12) Vijay’s employer is going to give him a gift worth Rs.60,000 (in kind) on his wedding
anniversary. Vijay wants to know the tax consequence of this transaction? (3)
A) Gift value is taxable for Vijay under the head‘ Salary’
B) Vijay’s employer is liable to pay FBT on the full value of gift
C) Not axcon sequence arises for Vijay and his employer as the gift is in kind
D) Rs50,000 is tax free and balance Rs.10,000 is tax able under the head‘ Salary’ for Vijay
13) Vijay's Mutual Fund investments consist of four different funds. Performance of these funds
are as follows:
Mutual Fund Fund Returnof5years Beta
A 18% p.a. 1.25
B 14% p.a. 0.85
C 16% p.a. 1.02
D 17% p.a. 1.20

How would you rank these funds from the best to worst on the basis of Jensen's Alpha? (4)
A) A, D, C&B B) A, B, C&D
C) C, B, A&D D) D, A, B&C
14) After preparing the Financial Plan of Vijay, you have given following notes to the Plan:
1. These recommendations are made for your benefit only.
2. These recommendations are based on the information provided by you on your current
situation; we expect this information to be complete and accurate.
3. Returns on investments will depend on market conditions and the policy of fund
management followed by fund managers.
4. The investments planned for you are long term in nature; therefore volatilities of short
term in nature should be ignored.
These notes are to your plan. (2)
A) disclosures B) disclaimers
C) executive summary D) additions
15) Vijay wants to know what interest amount, from his investment in NSC, would be eligible for
deduction u/s 80 C for the FY 2021-22. (3)
A) Nil B) Rs.2,215
C) Rs.2,209 D) Rs.2,267
16) Vijay wants to know the present approximate intrinsic value of his mother's house if the rental
income from the house is growing at the rate of 6.5% p.a. and the required rate of return on
the investments is10% p.a. (3)
A) Rs.3.60 lakh B) Rs.10 lakh
C) Rs.45 lakh D) Rs.4.50 lakh

Solutions
1) B)
Term 5180 – 29 Till Khyati is 80 years
inflation 0.04
Debt 0.09
Equity 0.15
Requirement 600000
per year returns needed today Note: For exact corpus requirement we need to follow an
alternative method.
Assumptions for corpus
If Corpus needed today 1000
Debt 900 45.43PMT (((1+0.09)/(1+0.04))-1,51,-900,0,1)
Equity 100 9.62PMT (((1+0.15)/(1+0.04))-1,51,-100,0,1)
Yearly withdrawal till khyati is 80 years 55.0545.43+9.62
Corpus needed is 10899344 600000*1000/55.05
Thus approx Sum Assured requirement is Rs.109 lakh
2) B)
Yearly effective
Inflation 0.04
Debt 0.09
Equity 0.15
Children's higher education
20:80 in Debt and Equity
No of years amount needed
Mayuresh 16,561,894 FV(0.04,16,0,-
300000,1)
Manjesh 19,632,055 FV(0.04,19,0,-
300000,1)
Note: For exact corpus requirement we need
to follow an alternative method.
Assumptions for Mayuresh
Yearly investment 100 719.47 FV(0.09,16,-20,0,1)
Debt 20 5,126.01 FV(0.15,16,-80,0,1)
Equity 80 5,845.48 719.47+5126.01
so to get Rs.5,61,894 investment per year

needed is

Thus approx investment per year needed for
Mayures his Rs.10,000
Assumptions for Manjesh Yearly investment 100

Debt 20
1,003.20 FV(0.09,19,-20,0,1)
Equity 80
8,115.49 FV(0.15,19,-80,0,1)
9,118.69 1003.2+8115.49
so to get Rs.6,32,055 investment per year

needed is
Thus approx investment per year needed for
Manjesh is Rs.7,000
9612.46100*561894/5845.48 9612.46100*561894/5845.48
6931.42100*632055/9118.69 6931.42100*632055/9118.69
3) B)
HRA
BasicSal 36240030200*12
DA 181200362400*0.5
CCA 3600300*12
Children Edu 2400(200*12*2)-2400
Transport All 2400(1000-800)*12
Bonus 60,000
Gross Salary 612,000
RFA 91800612000*0.15
4) C)
cost 500000
Year1 400000500000*0.8
Year2 320000400000*0.8
Year3 256000320000*0.8
Taxable 106000256000-150000
5) A)

6) B)
7) C)
8) B)
present age of Vijay 30
present age of Khyati 29
retirement age of Vijay 55
time to retire for Vijay 25 years 55-30
Monthly savings 35000
yearly increase in savings 8%
Kyati's age when Vijay retires 54 29+25
expected total life of Khyati 80
Khyati alive after retirement of Vijay 26 years 80-54
present expenses per year 252000 21000*12
inflation 4%
Rate of returns 10%
Expat retirement 671791 FV(4%,25,0,-252000,0)
retirement benefits 2000000
corpus needed at retirement 9451112 PV((1+10%)/(1+4%)-1,26,-
671791,0,1)
value of savings at retirement 9673494 ((35000*(((1+10%)^(25)-
(1+8%)^(25))/(10%-
8%)))*1.1)+2000000
surplus 222382 9673494-9451112
9) B)
Sum Assured 300000
Premium per quarter 2500
Bonus 120000
Interim Bonus 12000 300000/1000*40
Total amount due 432000 12000+120000+300000
Un paid premium 7500less (2500*3)
Amount to be payed today 424500 432000-7500
10) D)

Case Study - 9 (Somya)
Somya Vishwanathan, aged 38 years, life expectancy 75 years, is a free lance journalist working in
Mumbai. She is a spinster by choice and has been working in electronic media industry for the last 12
years. Somya lives in Mumbai with her parents who have their own flat in Navi Mumbai. Her father
Mr. R K Vishwanathan, aged 68 years, is a retired government officer and her mother Mrs. Shalini
Vishwanathan is a house wife. Somya’s younger brother Sanjay, aged 32 years is a Company
Secretary working in an MNC in Navi Mumbai. Sanjay’s marriage is fixed on 15 th August 2020 with
Minal who is a Chartered Accountant and working in the same organization with Sanjay. After
marriage Sanjay is likely to stay separately with his wife in a new flat which he has already purchased
and after wards Somya is the only person to take care of their parents.
Somya is planning to take franchise rights of multicity preschool chain. She wants to start this
preschool chain franchise in her father’s flat as this flat is quite spacious. The school will be making an
agreement with her according to which she is required to make an upfront security deposit of Rs. 10
lakh with the school. Apart from this security deposit, she will need to upgrade her flat according to
school’s norms in which she will have to incur a onetime cost of Rs. 10 lakh. She is also working as an
active partner in a partnership firm ‘Creative Arts’, with other three partners sharing profit and loss
equally, for the purpose of making documentary films. She is acting as a member of an NGO which is
working for welfare of orphan children.
Though Somya has no worry about her future as she is earning well in her profession, she has
contacted you a CERTIFIED FINANCIAL PLANNERCM practitioner today dated 18th April, 2020 for
managing her finances and to prepare a Financial Plan.
She has provided her details as follows:

Income/Cash Inflows (FY2019-20)
Net Income from profession1 Rs.6,86,000
Profit from partnership firm Rs.2,25,000
Loss in derivative trading at NSE India Rs. 3,56,000
Short Term Capital Gain (u/s111A) Rs. 90,560
1
beforeTDS
Expenses/Investments (FY2019-20)
Living/Personal Expenses Rs. 30,000p.m.
Investments u/s 80C Rs.1,00,000

Health Insurance Premium Rs. 24,930
Assets & Investments2
ULIP (4 contributions @ 25,000 each) Rs.1,00,000
Post Office NSCs Rs.1,00,000
Kisan Vikas Patra Rs. 70,000
Unit Linked Pension Policy Rs.1,25,000
Equity Mutual Funds Rs.2,25,000
Equity Shares Rs.3,50,000
Car (Present Market value) Rs.3,50,000
Corporate Bonds Rs.1,50,000
2
investments are stated at their original
investment amount
Goals& Aspirations:
1. Taking franchise rights to start a preschool chain in her parents flat.
2. Ensuring smooth cash flows for her house hold expenses for her complete life.
3. To enhance her skills by pursuing one year diploma in Journalism from UK after two year from
now. Present cost of this education is 25 Lakh.
4. To set up a school for orphan children by the time she retires at the age of 55 years.
5. She wants to purchase production rights from a documentary film making company and make
few documentaries. She would sell the rights of the company acquired along with
documentaries made within one year at a value of Rs. 30 lakh.
6. To arrange for a shortfall of Rs. 10 lakh for her brother Sanjay’s wedding. Assumptions
Inflation 5.00%p.a.
Risk Free Rate 7.50%p.a.
Equity Return 14.00%p.a.
Debt Return 10.00%p.a.
Personal Loan Rate 14.50%p.a.
Cost Inflation index
2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 9 (Somya)
1) Somya wants your advice to disclose her professional Income 50% less than the actual to
reduce her tax liability in the current year. You advice not to conceal particulars of her Income
or furnish an in accurate particulars of such income, as Penalty payable in addition to tax
under section 271(1)c of Income Tax Act is payable.
A) At the discretion of Commissioner of Income tax
B) Minimum 200% of the tax sought to be evaded and maximum 300% of the tax sought to
be evaded
C) minimum 100% of the Income sought to be evaded and maximum 300% of the Income
sought to be evaded
D) minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to
be evaded
2) Somya wants to know her tax liability for AY 2020-21. You have observed in total health
insurance premium which Somya paid in FY 2019-20; Rs. 15,950 was on the health insurance
of her parents and Rs.8,980 on her own health insurance. According to you her Income Tax
liability for AY 2020-21 would be .
A) Rs. 14130 B) Rs. 11,910
C) Rs. 17,080 D) Rs. 46,420
3) Being pessimistic due to the present recessionary market, Somya is thinking to surrender her
ULIP after 4 years subscription only. She wants to know from Income Tax planning perspective
whether it would be advisable for her to surrender this insurance policy at present as she
keeps on claiming deduction u/s 80C against this policy’s investment?
A) She should hold this policy for atleast one more year
B) She can surrender this policy any time after three years from the date of buying the
policy
C) She should hold this policy for atleast six more years
D) She should hold this policy for the full term
4) Somya wants to adopt a child and part with some of her properties in favour of the child. She
wants to plan her Estate as she will remain a spinster throughout her life. But she is afraid
that after her death her brother may challenge such transfer. You would advise her .

A) Not to do any Estate Planning
B) To prepare a WILL
C) To create a Registered Living Trust where the child would be the beneficiary
D) To prepare a Power of Attorney in favour of her father to manage her property for the
benefit of the child
5) In the franchise of a preschool chain that Somya wants to take, the school will share revenues
after expense with her in the ratio of 60:40 (60% Somya, 40% School). Operating expenses are
expected to remain 20% of the receipts. Expected receipts from this franchise are as follows:
Year1 Rs.6.00lakh
Year2 Rs.8.00Lakh
Year3 Rs.10.00 Lakh
Year4 Rs.12.00 Lakh
Year5 Rs.15.00 Lakh
Franchise rights shall be valid for 5 years after which initial security deposit shall be refunded
and new terms shall be set again. Somya wants to know the underlying IRR in this deal
assuming all revenues are received in the beginning of every year, expenses are set aside at
the same time and the first receipt shall come at the time of investments only. According to
you the same is .
A) 20.54%p.a. B) 45.93%p.a.
C) 13.66%p.a. D) 18.76%p.a.
6) For the purpose of Sanjay’s wedding, Somya has arranged finances from a finance company
by way of a personal loan in such a way that she gets Rs. 10 lakh net in hand after deduction
of an upfront processing fee of 1.25%. The arrangement is for a term of five years on the gross
amount of loan and repayable by 60 equated monthly installment with a pre-closure charge
of 3.50% on the outstanding balance. She wants to know if she prepays the entire loan exactly
after 1 year from the date of taking the loan, what effective rate of interests he might pay.
According to you the same is . (Please ignore any other charges and taxes if applicable)
A) 14.50%p.a. B) 16.10%p.a.
C) 18.88%p.a. D) 20.62%p.a.
7) Somya’s mother has invested Rs. 5.00 lakh in a New Fund Offer of an Equity Mutual Fund
scheme on 1st October 2018 at Rs. 10 per unit with an entry load of 2.25% and Exit load Nil
with Systematic Withdrawal Plan (SWP) of Rs. 10,000 per month effective from 1st April 2019.
From 1st October 2018 to 31st January 2019 the NAV of the scheme grew tan average rate of
2.50% per month, while from 1st February 2019 till date, the NAV declined at an average rate

of 3.15% per month. Somya wants to know the tentative value of units outstanding in her
mother’s MF scheme account as on 31st May 2020. Assume that the SWP is effected on the 1st
of every month. You estimate the same as .
A) Rs. 1.96Lakh B) Rs.6.93 lakh

C) Rs.2.12 lakh D) Rs.3.23 lakh
8) Somya wants to make an arrangement so that one-third of her present living/personal

monthly expense scan be met for the next 17 years till she stops earning at the age of 55
years, and there after the whole of her living/personal monthly expenses all adjusted to
inflation till she is alive. She wants to know what approximate lump sum amount she is
required to invest in risk free instruments in order to ensure such cash flows from the
beginning of next month.
A) Rs.54.60Lakh B) Rs.57.25Lakh
C) Rs.55.40Lakh D) Rs.55.15Lakh
9) A Life Insurance Agent has approached Somya with two types of Term Insurance Plans:
(i) Plan I, without return of premium, term 25 years, Sum Assured of Rs.25 lakh, yearly
premium payable Rs.1.94 per thousand of SA
(ii) Plan II, with return of total premiums paid, on maturity, term 25 years, Sum Assured of
Rs.25 lakh, yearly premium payable Rs.2.95 per thousand of SA.
Somya is not clear which plan to opt for and she seeks yours advice on which policy is
beneficial for her, if discounted by the risk free rate. (Assuming Somya lives till maturity of the
Insurance Policy)
A) Plan I is better as the net present value is higher
B) Plan I is better as the net present value is lower
C) Plan II is better as the net present value is higher
D) Plan II is better as the net present value is lower
10) Somya wants to know if she dies before the vesting date of the Unit Linked Pension Plan how
will it be taxed in the hands of the nominee for the amount received as per currently
prevailing provisions of the Income Tax Act, assume the allocation is 100% intoequity.
A) Fully Taxable
B) Fully Exempt
C) Subject to long term capital gain of 10% without indexation benefit
D) One third would be tax free

11) Somya holds two different corporate bonds, details of which are as under:
Bond Face Value(Rs.) Coupon Rate Pending tenure Market Value

(Annual) (till maturity in years) (Rs.)
Bond A 1,00,000 9.25% 3 98,000
Bond B 50,000 11.00% 3 51,300
The rate of Discount is 10%p.a., for both the bonds.

Somya wants to liquidate either Bond A or Bond B or both. Assuming that interest rate is paid
annually (at the end of the year), incase of both Bond A and Bond B, what would you advise
Somya?
A) Sell Bond A B) Sell Bond B
C) Sell Both Bonds A & B D) Don’t sell any of the Bonds
12) Somya’s father wants to deposit Rs. 15 lakh in Sr. Citizen Saving Scheme in each of his and his
wife’s account. He intends to accumulate this scheme’s interest in Gold ETF which is expected
to give an average monthly return of 0.75% per month (net of expense) and liquidate this
investment at the maturity time of Sr. Citizen Scheme. What would be the amount at maturity
if he deposits a lump sum amount in Sr. Citizen Saving Scheme at the end of June 2020?
(Please ignore taxes and charges if applicable)
A) Rs.46.84Lakh B) Rs.46.58Lakh
C) Rs.46.13Lakh D) Rs.63.30Lakh
13) Somya’s firm has approached a documentary film making company for the purchase of
production rights to produce five documentaries in a span of 9 months. There would be an
expenditure on various heads to the extent of Rs.50,000 p.m. payable to the company at the
end of every month towards making of the documentary films. Somya expects to sell the
rights of the company acquired along with the documentaries made at an aggregate value of
Rs. 30 lakh at the end of 9 months period. She is likely to incur 5% transaction cost at the time
of acquiring the rights of the company and a further 5% transaction cost at the time of selling
the rights along with documentaries. She requires an annual return of 100% in the whole
process of acquiring and selling these rights after incurring day – to – day production costs.
What is the maximum amount that firm should quote for the purchase of rights of the
company?
A) Rs.14,21,426 B) Rs.12,89,276
C) Rs.11,98,693 D) Rs.12,86,052

Solutions
1) D)
2) A)
Income from profession: 686000
Receipt from Partnership Firm: Rs.225000 Exempt
Derivatives loss at NSE 356000** -356000
**Permissible to be set off as non speculative loss
Short Term Capital Gain u/s111 A 90560
Gross Total Income= 420560
686000-356000+90560
Less:
Deduction u/s 80 C 100000
U/s 80 D 24930 124930 24930+100000
Total Income= 295630 420560-124930
Normal Rate Income= 205070 295630-90560

Special Rate Income= 90560
Tax on Normal Rate Income=
0-250000 Nil 0
Tax on Special Rate Income=
u/s 111 A @15% = 90560*.15= 13584 13584 13584
E.Cess 543.36 13584*.04
Total Tax= 14127.36 13584+543.3
Or 14130
3) A)
She should hold this policy for atleast one more year because if she surrenders this policy
before completion of 5 years, total 80 C deductions Claimed by her shall be added back to
her income in the surrender year of the policy
4) C)

5) A)
Upfront Security Deposit= 1000000
One Time Cost= 1000000
Net=80% Somya's Share - 288000-

Revenues Gross Year1
of Gross =60% of Net 1712000 (1000000+1000000)
Year1 600000 480000 288000 Year2 384000

Year2 800000 640000 384000 Year3 480000
Year3 1000000 800000 480000 Year4 576000
Year4 1200000 960000 576000 Year5 720000
Year5 1500000 1200000 720000 Year6 1000000 Refund of Deposit
20.54% IRR
6) D)
Loan Amount= 1000000
Rate of interest= 14.50%
Term= 5Years
Processing Fee= 1.25%
So Total Loan= 1012658 1000000/(1-1.25%)

EMI = 23826 p.m. PMT(14.5%/12,5*12,-1012658,0,0)
Outstanding Loan Balance
after1 Year 863955 FV(14.5%/12,12,-23826,1012658,0)
Pre Payment Charge= 3.50%
Total Amount to be paid after 1 Year= 894193 863955*1.035
Mode= End
Rate of interest= 1.57%p.m. RATE(12,-23826,1000000,-894193,0)
So Effective rate of interest 20.62%p.a. (1+0.0157)^12-1
7) C)
Original investment on1-10-
2019= 500000
NAV 10
Purchase Price 10.225 10*(1.0225
Units allotted 48899.7555 500000/(10*(1.0225))
SWPStartedfrom1stApril2020= 10000pmNAV

grew from
01-10-2019to31-01-2020= 2.50%pm
Estimated NAV as on 31-01-
2020 11.04 10*(1.025)^4
NAV grew from
01-02-2020to31-03-2021= 3.15%pm
Estimated NAVas on 31-03-2020 10.3537 (10*(1.025)^4)*(1-0.0315)^2
Units Outstanding units

Date Estimated Amount SWP
redeemed NAV
1-Apr-20 10.3537 10000 965.84 47,933.92
1-May-20 10.0275 10000 997.254 46,936.66
1-Jun-20 9.7117 10000 1,029.69 45,906.97
1-Jul-20 9.4058 10000 1,063.18 44,843.79
1-Aug-20 9.1095 10000 1,097.76 43,746.04
1-Sep-20 8.8225 10000 1,133.46 42,612.57
1-Oct-20 8.5446 10000 1,170.33 41,442.25
1-Nov-20 8.2755 10000 1,208.39 40,233.85
1-Dec-20 8.0148 10000 1,247.70 38,986.16
1-Jan-21 7.7623 10000 1,288.28 37,697.88
1-Feb-21 7.5178 10000 1,330.18 36,367.71
1-Mar-21 7.281 10000 1,373.44 34,994.27
1-Apr-21 7.0516 10000 1,418.11 33,576.16
1-May-21 6.8295 10000 1,464.23 32,111.93
8) C)
Risk free rate 7.50%pa 0.6045%p.m. (1+7.5%)^(1/12)-1
inflation 5.00%pa 0.4074%p.m. (1+5%)^(1/12)-1
Inflation adjusted (1+0.6045%)/(1+0.4074%)-
0.1963%p.m.
rate of interest 1
10000 On 1st May,
Requirement Rs. for 17 years 204 months
2009
68761 On retire (end
Requirement Rs. for 20 years 240 months
April'26)

30000*(1.05)^17
Pv of cash flows of
Rs.10,000 today
inflation adjusted
PV(0.1963%,204,-
a) 1,683,002
10000,0,1)
PV of cash flows of
inflation adjusted
PV(0.1963%,240,-
Rs.68761 on
68761,0,1)
retirement
13,176,043
13176043/(1+7.5%)
b) 3,853,373
^17
a)+b) 5536376 1683002+3853373
9) B)
4850 Present
Premium Payable for Plan I 58117 PV(0.075,25,-4850,0,1)
Value=
PV(0.075,25,-
Premium Payable for Plan II 7375 58141
7375,7375*25,1)
Risk Free Rate 7.50%
Tenure of the Policy 25
10) B)
11) B)
In order to ascertain the relative
attractiveness of the Bonds, we
PV(10%,3,-(100000*9.25%),-
compute the value of each Bond and 98,134.86
100000,0)
compare it with the market price Value
of Bond A =
Value of Bond A > Market price of Bond

A. i.e. Bond A is under - priced. Value of 51,243.43 PV(10%,3,-(50000*11%),-50000,0)
Bond B =

12) A)
Total deposit in Sr. Citizen Saving
Scheme = 15+15= 30 lakh
Time of Scheme= 5 years
Quarterly Interest from the scheme = 3000000*(.09/4) 67500
First Interest Payment will come = after 3 months from today
Rate of returning old ETF account = 0.75% per month
So MV of Gold ETF Account
No. of
month Op Bal Addition Intt. Cl Bal
4 0 67500 506 68006 506+67500+0
5 68006 0 510 68516 510+0+68006
6 68516 0 514 69030
7 69030 67500 1024 137554
8 137554 0 1032 138586
9 138586 0 1039 139625
10 139625 67500 1553 208679
11 208679 0 1565 210244
12 210244 0 1577 211821
13 211821 67500 2095 281415
14 281415 0 2111 283526
15 283526 0 2126 285653
16 285653 67500 2649 355801
17 355801 0 2669 358470
18 358470 0 2689 361158
19 361158 67500 3215 431873
20 431873 0 3239 435112
21 435112 0 3263 438376
22 438376 67500 3794 509670
23 509670 0 3823 513492
24 513492 0 3851 517343
25 517343 67500 4386 589230
26 589230 0 4419 593649

27 593649 0 4452 598101
28 598101 67500 4992 670593
29 670593 0 5029 675623
30 675623 0 5067 680690
31 680690 67500 5611 753801
32 753801 0 5654 759455
33 759455 0 5696 765151
34 765151 67500 6245 838896
35 838896 0 6292 845187
36 845187 0 6339 851526
37 851526 67500 6893 925919
38 925919 0 6944 932863
39 932863 0 6996 939860
40 939860 67500 7555 1014915
41 1014915 0 7612 1022527
42 1022527 0 7669 1030196
43 1030196 67500 8233 1105928
44 1105928 0 8294 1114223
45 1114223 0 8357 1122580
46 1122580 67500 8926 1199005
47 1199005 0 8993 1207998
48 1207998 0 9060 1217058
49 1217058 67500 9634 1294192
50 1294192 0 9706 1303898
51 1303898 0 9779 1313678
52 1313678 67500 10359 1391536
53 1391536 0 10437 1401973
54 1401973 0 10515 1412488
55 1412488 67500 11100 1491088
56 1491088 0 11183 1502271
57 1502271 0 11267 1513538
58 1513538 67500 11858 1592896
59 1592896 0 11947 1604842
60 1604842 0 12036 1616879

61 SCCS Maturity 3067500
Total
MV 4684379
13) B)
Value of rights of the company
along with document aries 3000000
made, targeted after 9 months
5% brokerage paid on this value 150000 3000000*5%
Net value to be received 2850000 3000000-150000
Cash flows in the 9 months
-50000
period of documentary making
-50000
-50000
-50000
-50000
-50000
-50000
-50000
2800000
100% per annum
Return to be targeted from the Monthly effective rate (1+100%)^
5.9463% per month
investment of return equivalent to (1/12)-1
100% p.a.
NPV(5.9463%,(-
Net Present Value of the above
1353739 50000,-50000, ,-
cash flows at the required rate
50000,2800000)
This is the return on actual
investment made.
Maximum amount which Somya
1289276 1353739/(1+5%)
must quote to obtain the rights

Case Study - 10 (OmPrakash)
Today on 1st April 2020, Omprakash a Mechanical Engineer had come to India to celebrate New Year
with his family. He is 49 years old and is working in an Indian Multinational Company. He is posted in
New York and is drawing an annual salary of Rs. 24 lakh. His personal monthly expenses at present
are Rs. 65,000. His wife Renu, aged 43 resides in Delhi and works with an NGO. She earns Rs. 30,000
p.m. They have two daughters Priyanka and Neha, aged 23 and 21 years, respectively. Priyanka is an
LLB and is presently undergoing internship with a reputed law firm. Neha is in the final year of her
graduation. Neha yearns to go on a world tour after completing her graduation and before she
enrolls for an MBA course from a US based institute. Omprakash’s father Hariom, aged 72, and
mother Veena, aged 67, are dependent on him. His father receives Rs. 20,000 p.m. from the reverse
Housing loan against his house in Gurgaon, apart from Rs.10,000 p.m. monthly expenditure from
Omprakash.
Omprakash has given his employer a notice for relieving himself from the job by 31st July 2020. He
joined the organization on 1st July 1997. He intends to come back to India and star this own business
from1st October 2020 in Delhi as a territory dealer of international electronics products, for which he
will require Rs. 50 Lakh for initial investment and working capital. He plans to take a shop on rent for
which he will have to pay a monthly rent of Rs. 40,000 and a security deposit equivalent to one year’s
rent (for the property valued today at Rs. 40 Lakh), subject to inflation adjustment on annual basis.
He has got an offer on similar terms of lease from Mr. Ramchandani who is the owner of the
property. The term soft he lease areas following:
1. Lease shall be valid for a period of five years and the Lease Agreement can be renewed after
the expiry of the five - year period with the mutual consent of the parties.
2. After five years, Omprakash will have the option to either purchase the shop at the prevailing
market price or to renew lease at 10% increment al rent on the preceding year’s inflation-
adjusted rent.
His remuneration and other benefits from his current employer are as follows:
1. CTC of Rs 24 lakh p.a.

2. He is a member of his employer’s Pension and Provident Funds. He and his employer each
contribute 12% of his salary to the pension fund and provident fund as per EPS and
Miscellaneous Act, 1995.
3. His Basic Salary is Rs.80,000 p.m. and Dearness Allowance is Rs.30,000p.m. of which 100% is
included for retirement purpose.

4. In addition, his employer had contributed to super annotation fund, which has accumulated
to Rs.20 Lakh.
5. His leave encashment due is to the extent of Rs.5 lakh. The company has a policy of providing
30 days leave per year and Omprakash has availed into a leave of 300 days.
His Assets and Liabilities are as follows:

Assetsas on 31st Dec 2019 Amount (in Rs. Lakh)
Residential House 80.00
Equity Oriented Mutual Fund Schemes 15.00
Furniture & Fixtures 7.00
PPF (Matures on 1st April, 2022) 12.00
Car 5.00
Jewellery 7.00
Bank FD 8.00
Cash in hand 2.00
Money Market Mutual Fund 8.00
ELSS 15.00
Liabilities as on 31st Dec 2019

Housing loan (outstanding Balance) 30.00
Car loan (outstanding bal) 2.5
Income Tax outstanding 1.00

Personal loan (outstanding Balance) 1.50
Life Insurance
He bought a Term Insurance five years ago with a sum assured of Rs. 60 lakh for which he pays
premium of Rs.25,000 p.a. He also has an endowment plan which he bought on 20th March 2007 with
a sum assured of Rs. 30 Lakh, term of 20yearsforwhichhepays premium of Rs. 55,000 half yearly.
Renu has invested Rs. 6 lakh in the new fund offer of Equity oriented MF scheme and was allotted
units at NAV of Rs. 10. The present NAV is Rs. 12.50. She opened the PPF A/c. by making a
subscription of Rs. 9,000 on 25th March 2009. She has been making regular quarterly contributions to
the PPF Account in the beginning of each quarter starting from April, 1998 @Rs. 9,000 per quarter.
These quarterly contributions have been increased by 4.5% year on year since then, and would like to

continue till maturity of the account subject to maximum permissible subscription.
Omprakash has the following goals:
1. One year from now he wants Rs. 20 lakh for Neha’s education and a further Rs. 30 lakh after 5
years from now for her wedding.
2. He wants Rs.30 lakh after 3 years from now for Priyanka’s wedding.
3. He wants to retire at 62 years of age and he expects to live upto 80 years. His wife’s life
expectancy is 74years.
4. He wishes to purchase a new car for Rs. 12 lakh. Assumptions:
1. Risk free rate: 6% p.a.
2. Inflation rate: 5.5% p.a.
3. Return on Equity/ Equity based MF: 12% p.a.
4. Return on Money Market Mutual Fund: 6% p.a.
5. Real Estate Appreciation: 9% p.a.
Cost Inflation index
2001-2002 100 2004-2005 113 2007-2008 129 2010-2011 167 2013-2014 220 2016-2017 264
2002-2003 105 2005-2006 117 2008-2009 137 2011-2012 184 2014-2015 240 2017-2018 272
2003-2004 109 2006-2007 122 2009-2010 148 2012-2013 200 2015-2016 254 2018-2019 280
2019-2020 289 2020-2021 301

Case Study - 10 (OmPrakash)
1) Omprakash is eligible to receive Gratuity from his Company. His Company calculates Gratuity as
per the Payment of Gratuity Act, 1972 and pays higher amount, if eligible, to its employees than
the statutory limit as per the Act. He wants to know what amount of Gratuity he is likely to get
from the Company and what amount will be taxable out of the same.
A) Rs.14,59,615 and Rs.0 B) Rs.12,65,000 and Rs.9,15,000
C) Rs.9,20,000 and Rs. 5,70,000 D) Rs.12,24,194 and Rs.8,74,194
2) Post-retirement, Omprakash would require 70% of his current personal annual expenses
adjusted for inflation in the beginning of the first year of his retirement. He wants to leave Rs.
25 lakh cash, at then prices, for both his daughters each as estate. He wants to know what
monthly amount towards his retirement corpus and estate is required to be invested in an
Equity oriented MF from today onwards till his retirement. In the distribution phase, the corpus
is invested in a Pension fund yielding annual inflation-adjusted annuity yielding 100 basis points
above risk free rate.
A) Rs. 74,121 B) Rs. 37,075
C) Rs. 53,125 D) Rs. 51,058
3) Priyanka plans to continue working with the current law firm for three more years after which
she proposes to start her own law firm for which she would require an amount of Rs. 20 Lakh
without price escalation. Omprakash has already earmarked Rs.5 Lakh for the purpose.
Omprakash wants to know what amount he requires to invest at the beginning of each quarter
of year from now onwards in a Money Market Mutual Funds as to accumulate the sum when
required.
A) Rs.1,15,020 B) Rs.1,07,696
C) Rs.1,13,320 D) Rs.1,06,333
4) Omprakash wants to repay his personal loan and outstanding tax, for which he is getting a new
personal loan at an interest rate of 19% p.a. for a term of 3 years. The previous personal loan
was taken at an initial rate of 24% p.a. and three years still remain before the loan is paid off.
Further, he is planning to reschedule his outstanding Housing loan. The existing Housing loan
was taken at a fixed interest rate of 8% p.a. with remaining tenure of 8 years. The existing
Housing loan would be re-financed at a variable rate of interest 6% p.a. for tenure of 10 years.

He wants to know the Gross EMI payable on both rescheduled loans. Further, he wants to know
the amount of overall interest to be saved on the outstanding amounts of existing loans. The
same are . (All interest rates are to be
taken as monthly compounded rates; Ignore inflation and other charges)
A) EMI Rs.38,804 and Interest saved Rs.88,540
B) EMI Rs.42,470 and Interest saved Rs.88,540
C) EMI Rs.42,470 and Interest saved Rs.48,565
D) EMI Rs.38,804 and Interest saved Rs.56,578
5) Omprakash’s father Mr. Hariom has taken a loan under reverse mortgage scheme against his
house in Gurgaon which is valued today at Rs. 20 lakh. Omprakash is curious to know, if the
loan amount being received by his father will be treated as income and whether the alienation
of property for recovery of loan attracts capital gains?
A) The amount received by Mr. Hariom shall be treated as his income and it will be taxable
in his hands and for the purpose of alienation of property for recovery of loan shall
attract capital gain.
B) The amount received by Mr. Hariom shall not be treated as his income and shall be
exempt from tax and for the purpose of alienation of property for recovery of loan shall
not attract capital gain.
C) The amount received by Mr. Hariom shall not be treated as his income hence shall not
be taxed, for the purpose of alienation of property for recovery of loan shall attract
capital gain.
D) The amount received by Mr. Hariom shall be treated as his income and it will be taxable
in his hand sand for the purpose of alienation of property for recovery of loan shall
attract capital gain but only in case of death of the mortgagor.
6) Omprakash read a draft offer document that PFRDA has come out with a New Pension Scheme
(NPS) for all citizens of India. He is also thinking to invest in NPS but he is confused with regards
to the withdrawal provisions of the scheme in Tier-I. You are required to provide him with the
correct details of the withdrawal.
i. If he exits before 60 years of age, he will have to invest at least 20% of the pension wealth
to purchase a life annuity and the rest 80% of pension wealth may be withdrawn as a
lump sum.
ii. If he exits on attaining 60 years of age, he will have to invest at least 40% of the pension
wealth to purchase a life annuity and the rest 60% of pension wealth may be withdrawn
as a lump sum or in a phased manner between ages 60 and 70 years.

iii. If he exits before 60 years, he will have to invest at least 80% of the pension wealth to
purchase a life annuity and the rest 20% of pension wealth may be withdrawn as a lump
sum.
iv. If he exits on attaining 60 years of age, he will have to invest at least 60% of the pension
wealth to purchase a life annuity and the rest 40% of pension wealth may be withdrawn
as a lump sum or in phased manner between ages 60 and 70 years.
A) iv B) ii
C) iii D) iv
7) Omprakash, in a business conference met a CFPCM Practitioner who was one of his old friends.
Both of them were discussing about their professions and businesses and during the talks
Omprakash asked for some recommendation on his personal finances from his CFPCM friend. He
suggested Omprakash to come to his office and he will provide there commendations in
writing. Omprakash asked, is it important to have it in writing? You as a CFP CM Practitioner
explained that all recommendations concerning the financial affairs of a client should be
presented in writing because:
1) It is regarded as best practice under the FPSB India code of ethics and rules of professional
conduct.
2) It provides substantial protection to the planner under common laws against any claims
arising thereof.
3) It will not attract the law of contract to determine the civil rights of both the parties.
4) It gives the client the necessary time to fully consider the planner’s recommendations.
A) 1,2 and 4 only B) 2,3 and 4 only
C) 1 and 4 only D) 1,2, and 3 only
8) Omprakash is planning to create as pacific trust under a will and start the new business under
the name of the trust. He plans to have Neha as 100% specific beneficiary of the trust for her
support and maintenance. He approached you a CERTIFIED FINANCIAL PLANNER CM to take
advice on creation of trust. You as a CFPCM Practitioner are required to provide him with the
provisions relating to taxation of the income of the trust if the said trust is the only trust
created by Omprakash in the benefit of Neha.
A) The specific trust will be assessable at a flat rate of 20% plus cess plus surcharge if the
income of the trust exceeds Rs.10 lakh.
B) The specific trust will be assessable at the maximum marginal rate of income tax u/s
161(1A) of the Income Tax Act.

C) This private trust will be taxed at a slab rate applicable for individual provided it does
not have business income. Any business income may be taxed @ 30% or at slab rate.
D) The specific trust under Indian Trust Act cannot override the provisions of the Income
Tax Act and Omprakash will be assessed under the head of Business and profession as
per provisions applicable to an individual.
9) Omprakash is wondering that whether he will be able to meet the expenses towards the
wedding and education of his both daughters. He plans to liquidate his portfolio to the extent
of Rs. 58 Lakh for both the daughters’ education and wedding and invest in money market
mutual fund for first 1.5 years and then shift to equity oriented mutual fund for the remaining
tenure. He wants to know the deficit/ surplus at his disposal while meeting the last of the said
goals. (Please ignore taxes and charges if applicable)
A) Surplus of approx. Rs.4 lakh B) Surplus of approx. Rs.1.5 lakh
C) Deficit of approx. Rs.6 lakh D) Deficit of approx. Rs.4 lakh
10) Renu is planning to donate to her NGO the maturity proceeds of her PPF A/c. She started
withdrawing the maximum eligible amount from the PPF account since the beginning of April
2016 every year and invested the same immediately in an Equity MF scheme. The market value
of units in the Equity MF scheme as on 1st April, 2020 stood at Rs. 5.20 lakh. The balance in the
PPF A/c. as on 1st April, 2020 was Rs. 1,82,614. She did not withdraw any amount from the PPF
A/c. in April, 2020, and does not intend to withdraw any amount till maturity of the account.
However, she continued to increase her quarterly subscriptions to PPF A/c. which for the year
2020-2021is Rs. 14,000 per quarter. She wishes to donate the maturity amount of her PPF A/c
maturity proceeds while Equity MF scheme’s value of investment would be retained for self.
She would not contribute any further amount in her Equity MF scheme. She wants to know the
approximate amounts in her PPF A/c. and her Equity scheme investment coinciding with the
maturity of her PPF A/c. The same are . (Assume the interest rates and other
provisions are applicable to the PPF scheme as prevailing today and ignore taxes and charges if
applicable for other investments)
A) Rs.8.18 lakh Equity MF and Rs. 5.61 lakh PPF A/c
B) Rs.9.16 lakh Equity MF and Rs. 6.23 lakh PPF A/c
C) Rs.8.18 lakh Equity MF and Rs. 6.54 lakh PPF A/c
D0 Rs.9.16 lakh Equity MF and Rs.6.43 lakh PPF A/c

11) Omprakash is planning to sell his old car and contribute the sale proceeds thus received to buy
a new car in the name of his wife. The shortfall is made good by selling Renu's investment in
equity oriented mutual fund and taking a loan for the balance amount. The car finance
company has quoted a rate of interest 8.75% p.a. compounded quarterly. You arrange to pay
the installments on a monthly basis by convincing the company to adjust the interest rate on
equivalent annual effective basis. The EMI on the one year car loan comes to .(Please ignore
any charges and taxes if applicable)
A) Rs. 19,993 p.m. B) Rs.17,461 p.m.
C) Rs. 17,588 p.m. D) Rs. 17,340 p.m.
12) In the initial stage of Financial Plan preparation, you told Omprakash and also mentioned in the
Financial Plan prepared that you would charge fixed fee for the Financial Plan construction and
you would also earn commission on sale of recommended financial products, if the same is
A) Objectivity B) Fairness
C) Integrity D) Professionalism
13) Omprakash wants to take life insurance cover for his wife also, ass he has no insurance cover.
He wants to buy a Joint Life Policy for both of them. He has been paying all the life insurance
premiums on time and wants to know the paid up value of this existing endowment policy as of
today in order to make a prudent decision. This endowment policy has vesting bonus Rs.8.5
lakh till date.
A) Rs.28.00 lakh B) Rs.19.50 lakh
C) Rs.27.25 lakh D) 30% of premium paid plus vested bonus
14) Omprakash is planning to invest in two companies ABC and XYZ. The coefficient of correlation
between the two stocks ABC and XYZ is 0.7. The standard deviation of returns for ABC is 18%
and the standard deviation of returns for XYZ is 22%. The expected return for XYZ is 18% and
the expected return for ABC is15%. Calculate the expected returns and standard deviation of
Omprakash’s portfolio for which he plans to invest Rs.4 lakh in XYZ Company and Rs.2 lakh in
ABC Company.
A) 16.33 % and 18.83 B) 17.00% and 19.34
C) 19.01% and 20.77 D) 16.95% and 19.38

Solutions
1) A)
Basic Salary p.m. 80000
Dearness Allowance p.m. 30000
Total Salary for Gratuity purpose 110000 80000+30000
No. of years of service 23

Eligible Gratuity as per Act 1459615 (110000*23)*15/26
Tax Free Gratuity (Limits are
increased to 20,00,000) 1459615
Taxable 0
2) C)
Expenses per month = Rs65000
Yearly expenses = (65000*12) 780000 65000*12
Present age 49
Age at retirement 62
Life expectancy 80
Investment year sun to retirement 13 62-49
Annuity required for number of years 18 80-62
Annuity required in the first year of
retirement 780000*(1.055)^13*0.7
1,095,153
(Inflation adjusted curtailed to 70% of
present expenses)
Yield of annuity (1% above risk-free rate
of return) 7.00%p.a.
Rate of inflation 5.50%p.a.
Corpus required at the time of retirement PV((1+7%)/(1+5.5%)-1,18,-
for expenses 17,530,539 1095153,0,1)
Corpus required at the time of retirement
for providing for 50 lakh as residue 1,479,320 17530539+1479320
Total Corpus required 19,009,858
To accumulate this Corpus, a certain sum
has to believe stedin an Equity oriented
MF scheme per month

Rate of Return of Equity MF scheme 12%p.a.
PMT((1+12%)^(1/12)-
Amount to be invested per month 53125 1,12*13,0,-19009858,1)
3) D)
Amount required by
Priyanka after 3 years = Rs (FV after three 2000000 This is the value on
20 lakhs years) 26th year
Amount ear marked for the FV(6%,3,0,-
same = Rs 5 lakhs 500000,1) 595508 value after 3 years
Future value of the
remaining amount = Rs
14,04,492 1404492 2000000-595508
Rate of return of Money
Market MF 6.00%p.a.
Quarterly effective rate of
return 1.47% (1+6%)^(1/4)-1
Quarterly amount required
to be invested to attain the -106333
goal for the next three years PMT(1.4674%,12,0,1404492,1)
Alternative method PV
00000
FV 2
000000
pmt - PMT(1.4674%,12,-
106333 500000,2000000,1)
4) B)
Present Personal loan 150000
Tax outstanding 100000
Total Amount outstanding 250000 150000+100000
EMI for Rs150,000 for 3 5885 PMT(24%/12,3*12,-
years @24% 150000,0)
Total Amount payable 211857 5885*(3*12)
Interest payable 61857 211857-150000
EMI for Rs 1,50,000 for 3 5498 PMT(19%/12,3*12,-
years @19% 150000,0)
Total amount payable 197943 5498*(3*12)
Interest payable 47943 Interest 61857 -
197943-150000 saved 47943

EMI for Rs2,50,000 for 3 9164 PMT(19%/12,3*12,-
years 250000,0)
Total amount payable 329904 9164*(3*12)
Interest payable 179904 329904-150000
Renewed(10Yrs) Existing(8Yrs)
6.00% 8.00%InterestPayable
EMI on 30 lacs 33306 42410
Total amount payable 3996738 4071364
Interest payable 996738 1071364 74626 1071364 -
interest 996738
saved
Gross EMI payable after 42470 33306+9164

rescheduling
Interest saved after 88540 13915+74626
rescheduling
5) C)
6) C)
7) A)
8) C)
9) D)
Annual rate MMMF 6.00%
Half-yearly rate 2.96% (1+6%)^(1/2)-1
MMMF
Annual rate Equity MF 12.00%
Half-yearly rate Equity 5.83% (1+12%)^(1/2)-1
MF
Dates Portfolio Withdrawn
Amount Amount
1-Jan-21 5800000
1 year 31-Dec-21 6148000 0
1-Jan-22 4148000 2000000
1.5 year 30-Jun-22 4270627 0
Deficit -413477
(2586523-

3000000)
10) D)
Outstanding Quaterly
Date Withdrawal
Balance Contribution
1-Apr-20 182614 14000
1-Jul-20 14000
1-Oct-20 14000
1-Jan-21 14000
(182614+14000)*0.08+14000
1-Apr-21 256023 14630 17409 *0.08*3/4+14000*0.08/2+140
00*0.08/4
1-Jul-21 14630 0
1-Oct-21 14630 0
1-Jan-22 14630 0
(256023+14630)*0.08+14630
1-Apr-22 337951 15288 23408 *0.08*3/4+14630*0.08/2+146
30*0.08/4
1-Jul-22 15288 0
1-Oct-22 15288 0
1-Jan-23 15288 0
(337951+15288)*0.08+15288
1-Apr-23 429198 15976 30094 *0.08*3/4+15288*0.08/2+152
88*0.08/4
1-Jul-23 15976 0
1-Oct-23 15976 0
1-Jan-24 15976 0
(429198+15976)*0.08+15976
1-Apr-24 530635 16695 37531 *0.08*3/4+15976*0.08/2+159
76*0.08/4
1-Jul-24 16695 0
1-Oct-24 16695 0
1-Jan-25 16695 0
(530635+16695)*0.08+16695
1-Apr-25 643205 45790 *0.08*3/4+16695*0.08/2+166
95*0.08/4
Equity MF
Scheme
Accumulated
Year Amount

1-Apr-20 520000
1-Apr-25 916418 520000*(1.12)
^5
11) B)
Mutual Funds Market Value
600000 60000 Units 750000 60000*12.5
Car Market Value 500000
Car Loan O/S 250000
Net Value of Car Available 250000 500000-250000
Total Amount 1000000 750000+250000
Available New Car Value 1200000
1200000-
Loan Taken 200000
1000000
EMI for Loan
(1+0.0875/4)^4-
8.75%compoundedquarterly p.a. effective
1
0.7239% (1+9.0413%)^(1/12)-1
A monthly compounded rate
PMT(0.7239%,12,-
equivalent to 9.0413% p.a.
200000,0,0)
effective
EMI 17461
12) A)
13) A)
Sum Assured 3000000
Premium 55000halfyearly
No. of prem. paid 26
Total No. of prem.
payable Paid Up Sum
Assured 40
(No. of premium paid/ Total No. of premium payable)*Sum Assured

195000 26/40*3000000

Vested bonus 850000
Paid up Value 2800000 1950000+850000
B)
60000
Portfolio Amount
0
The portfolio
weight for
40000 400000/60000
XYZ 66.67% 400000/600000
0 0
20000 200000/60000
ABC 33.33% 200000/600000
0 0
Excepted Return
of ABC Excepted 15.00%
Return of XYZ
Expected Return
of the Mr. Om
18.00%
Prakash’s
Portfolio is
Expected Return
of the Mr. Om
17.00% 0.67*(18)+0.33*(15)
Prakash’s
Portfolio is:
Standard
0.18
Deviation of
ABC Standard
0.22
Deviation of
XYZ The Co
efficient of 0.70
correlation
The variance of (0.67)^2*(22)^2+(0.33)^2*(18)^2+

374.31
the portfolio 2(0.67)*(0.33)*0.7*22*18
19.35 (374.31)^(1/2)
is: Standard
Deviation of the
portfolio

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CFP FINAL LEVEL

CASE STUDY – 3 115

CASE STUDY - 4 137

CASE STUDY - 6 172

CASE STUDY - 7 192

CASE STUDY - 8 212

CASE STUDY - 9 222

CASE STUDY - 10 235

It has 3 Modules and all these are highly theoretical in nature.

Module 1: Financial Planning Process, Principles and Practice

1. Establish and define the relationship with the client

2. Collect the client's information

3. Analyze and assess the client's financial status

5. Implement the client's financial planning recommendations

6. Review the client's situation

Module 3: Developing Effective Financial Plans

Capstone Project: Financial Plan Assessment Project

1. One Mark Questions

2. Three Marks Question

PART 1 : Conceptual MCQs (1 Mark Questions)

PART 2 : Case Study Based MCQs (3 Mark Questions)

All the best !!

CFP Final Level: Workbook Page 1

a) Right time, Right amount of money

a) The surviving parent may operate the account alone.

CFP Final Level: Workbook Page 3

a) Beta, Sharpe Ratio, Standard Deviation, Alpha, R-Squared.

a) Principle of Insurable Interest

CFP Final Level: Workbook Page 4

a) Rupee Cost Averaging

CFP Final Level: Workbook Page 5

a) Identification of the service(s) to be provided

CFP Final Level: Workbook Page 6

ii) , iii), iv) and vi)

i) , ii), iii), iv) and v)

i) , ii), v) and vi)

a) Professional requirement under Code of Ethics of FPSB India

a) Diversified Equity Growth Mutual Fund Scheme.

CFP Final Level: Workbook Page 7

I. CERTIFIED FINANCIAL PLANNERCM

CFP Final Level: Workbook Page 8

CFP Final Level: Workbook Page 9

a) Whole Life Insurance Plan

CFP Final Level: Workbook Page 10

1. Developing and Presenting the Financial plan

(a) Return on assets

CFP Final Level: Workbook Page 11

a) Diversification of the Mr. X's assets.

CFP Final Level: Workbook Page 12

a) Exercising reasonable and prudent judgment in dealing with Mr. X.

CFP Final Level: Workbook Page 13

a) Loss or damage by the insured’s domestic staff’s direct or indirect involvement in an

CFP Final Level: Workbook Page 14

a) Yes, as Mr. X has no objection

CFP Final Level: Workbook Page 15

1. Developing and Presenting the Financial plan

a) ₹ 63,000, as any amount received in excess of ₹ 50,000 is taxable.

CFP Final Level: Workbook Page 16

CFP Final Level: Workbook Page 17

a) Keep the client informed of developments in the field of Financial Planning.