FPSBI/M-VI/05-01/09/WN-13

Solutions: Somya Vishwanathan

1)

D)

2)

A)
Income from profession:
Receipt from Partnership Firm: Rs. 225000
Derivatives loss at NSE

686000
Exempt
356000 **
-356000

** Permissible to be set off as non speculative loss

Short Term Capital Gain u/s 111 A
Gross Total Income=
Less:
Deduction u/s 80C
U/s 80D

100000
24930
Total Income=

Normal Rate Income=

Special Rate Income=
Tax on Normal Rate Income=
0-180000
180001-205070
Tax on Special Rate Income=
u/s 111 A @15%=90560*.15=

686000-356000+90560

124930

24930+100000

295630

420560-124930

205070
90560

295630-90560

Nil
2507 (205070-180000)*0.1

2507

13584

13584
E.Cess
Total Tax=
Or

3)

90560
420560

16091 13584+2507
482.73 16091*0.03
16573.73
482.73+16091
16570

A)

She should hold this policy for at least one more year because if she surrenders this policy before completion of 5 years, total 80C deduction
claimed by her shall be added back to her income in the surrender year of the policy
4)

C)

5)

A)
Upfront Security Deposit=
One Time Cost=
Revenues
Year 1
Year 2
Year 3
Year 4
Year 5

Gross
600000
800000
1000000
1200000
1500000

1000000
1000000
Net=80% of Gross Somya's Share=60% of Net
480000
288000
640000
384000
800000
480000
960000
576000
1200000
720000

Year 1
Year 2
Year 3
Year 4
Year 5
Year 6

FPSB India/Public

-1712000
384000
480000
576000
720000
1000000
20.54%

288000-(1000000+1000000)

Refund of Deposit
IRR

FPSBI/M-VI/05-01/09/WN-13
6)

D)
Loan Amount=
Rate of interest=
Term =
Processing Fee=
So Total Loan=
EMI =
Outstanding Loan Balance after 1 Year
Pre Payment Charge=
Total Amount to be paid after 1 Year=
Mode=
End
rate of interest=
So Effective rate of interest

7)

1000000
14.50%
5 Years
1.25%
1012658
23826
863955
3.50%
894193

863955*1.035

1.57% p.m.
20.62% p.a.

C)
Original investment on 1-10-2007=
500000
NAV
10.00
Purchase Price
10.225
Units alloted
48899.7555
SWP Started from 1st April 008=
10000
NAV grew from
01-10-2007 to 31-01-2008=
2.50%
Estimated NAV as on 31-01-2008
11.04
NAV grew from
01-02-2008 to 31-03-2009=
3.15%
Estimated NAV as on 31-03-2008
10.3537
Date
Estimated Amount SWP
Units redeemed
NAV
1-Apr-2008
10.3537
10000
965.840
1-May-2008
10.0275
10000
997.254
1-Jun-2008
9.7117
10000
1,029.689
1-Jul-2008
9.4058
10000
1,063.179
1-Aug-2008
9.1095
10000
1,097.758
1-Sep-2008
8.8225
10000
1,133.463
1-Oct-2008
8.5446
10000
1,170.328
1-Nov-2008
8.2755
10000
1,208.392
1-Dec-2008
8.0148
10000
1,247.695
1-Jan-2009
7.7623
10000
1,288.275
1-Feb-2009
7.5178
10000
1,330.176
1-Mar-2009
7.2810
10000
1,373.439
1-Apr-2009
7.0516
10000
1,418.110
1-May-2009
6.8295
10000
1,464.233
31-May-2009
6.6144

Estimated Value of units as on 31-May-2008

1000000/(1-1.25%)
p.m.
PMT(14.5%/12,5*12,-1012658,0,0)
FV(14.5%/12,12,-23826,1012658,0)

RATE(12,-23826,1000000,-894193,0)
(1+0.0157)^12-1

10*(1.0225)
500000/(10*(1.0225))
pm
pm
10*(1.025)^4
pm
(10*(1.025)^4)*(1-0.0315)^2
Outstanding units
47,933.915
46,936.662
45,906.973
44,843.794
43,746.035
42,612.573
41,442.245
40,233.853
38,986.158
37,697.883
36,367.707
34,994.268
33,576.158
32,111.925
32,111.925
212401

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13
8)

C)

a) + b)
9)

Risk free rate

inflation
Inflation adjusted rate of interest
Requirement Rs.
Requirement Rs.

7.50% pa
5.00% pa

Premium Payable for Plan I

Premium Payable for Plan II
Risk Free Rate
Tenure of the Policy

4850 Present Value=

7375
7.50%
25

10000 On 1st May, 2009

68761 On retire (end April'26)
30000*(1.05)^17
PV of cashflows of inflation adjusted Rs. 10,000 today
10000
a)
1,683,002 PV(0.1963%,204,-10000,0,1)
PV of cashflows of inflation adjusted Rs. 68761 on retirement
13,176,043 PV(0.1963%,240,-68761,0,1)
PV of above post-retirement cashflows today
b)
3,853,373 13176043/(1+7.5%)^17
5536376 1683002+3853373

0.6045% p.m.
0.4074% p.m.
0.1963% p.m.
for 17 years
for 20 years

(1+7.5%)^(1/12)-1
(1+5%)^(1/12)-1
(1+0.6045%)/(1+0.4074%)-1
204 months
240 months

B)

10)

A)

11)

B)

58117
PV(0.075,25,-4850,0,1)
58141 PV(0.075,25,-7375,7375*25,1)

In order to ascertain the relative attrativeness 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 under-priced.
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
12)

A)
Total deposit in Sr Citizen Saving Scheme=
Time of Scheme=
Quartely Interest from the scheme=
First Interest Payment will come=
Rate of return in gold ETF account=

15+15=
30 lakh
5 years
3000000*(.09/4)
after 3 months from today
0.75% per month

67500

So MV of Gold ETF Account

No. of month

Op Bal

4
5
6

Addition

0
68006
68516

Intt

67500
0
0

Cl Bal

506
510
514

68006 506+67500+0
68516 510+0+68006
69030

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

69030
137554
138586
139625
208679
210244
211821
281415
283526
285653
355801
358470
361158
431873
435112
438376
509670
513492
517343
589230
593649
598101
670593
675623
680690
753801
759455
765151
838896
845187
851526
925919
932863
939860
1014915
1022527
1030196
1105928
1114223
1122580
1199005
1207998
1217058

67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500
0
0
67500

1024
1032
1039
1553
1565
1577
2095
2111
2126
2649
2669
2689
3215
3239
3263
3794
3823
3851
4386
4419
4452
4992
5029
5067
5611
5654
5696
6245
6292
6339
6893
6944
6996
7555
7612
7669
8233
8294
8357
8926
8993
9060
9634

137554
138586
139625
208679
210244
211821
281415
283526
285653
355801
358470
361158
431873
435112
438376
509670
513492
517343
589230
593649
598101
670593
675623
680690
753801
759455
765151
838896
845187
851526
925919
932863
939860
1014915
1022527
1030196
1105928
1114223
1122580
1199005
1207998
1217058
1294192

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13
50
1294192
51
1303898
52
1313678
53
1391536
54
1401973
55
1412488
56
1491088
57
1502271
58
1513538
59
1592896
60
1604842
61 SCCS Maturity

0
0
67500
0
0
67500
0
0
67500
0
0

9706
9779
10359
10437
10515
11100
11183
11267
11858
11947
12036

1303898
1313678
1391536
1401973
1412488
1491088
1502271
1513538
1592896
1604842
1616879
3067500
4684379

Total MV
13)

B)
Value of rights of te company alongwith documentaries made, targeted after 9 months
5% brokerage paid on this value
Net value to be received

3000000
150000 3000000*5%
2850000 3000000-150000

Cashflows in the 9 months period of documentary making

-50000
-50000
-50000
-50000
-50000
-50000
-50000
-50000
2800000

Return to be targeted from the investment

Monthly effective rate of return equivalent to 100% p.a.

100% per annum

5.9463% per month

Net Present Value of the above cashflows at the required rate

This is the return on actual investment made.
Maximum amount which Somya must quote to obtain the rights

1353739

(1+100%)^(1/12)-1

NPV(5.9463%,(-50000,-50000, . . . . , -50000, 2800000)

1289276 1353739/(1+5%)

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13
Solutions: Omprakash
14)

A)

Basic Salary p.m.

Dearness Allowance p.m.
Total Salary for Gratuity purpose

No. of years of service

Eligble Gratuiy as per Act

Tax Free Gratuiy

Taxable
15)

80000
30000
110000 80000+30000
23
1459615 (110000*23)*15/26
350000
1109615 1456915-350000

C)

Expenses per month=Rs 65000

Yearly expenses= (65000*12)
Present age
Age at retirement
Life expectancy
Investment years unto retirement
Anuity required for number of years
Annuity required in the first year of retirement
(Inflation adjusted curtailed to 70% of present expenses)
Yield of anuity (1% above risk-free rate of return)
Rate of inflation

780000
49
62
80
13
18
1,095,153

62-49
80-62
780000*(1.055)^13*0.7

7.00% p.a.
5.50% p.a.
17,530,539
PV((1+7%)/(1+5.5%)-1,18,-1095153,0,1)
1,479,320
19,009,858 17530539+1479320

Corpus required at the time of retirement for expenses

Corpus required at the time of retirement for providing for 50 lakh as residue
Total Corpus required
To accumulate this Corpus, a certain sum has to be invested in an
Equity oriented MF scheme per month
Rate of Return of Equity MF scheme
Amount to be invested per month
16)

65000*12

12% p.a.
53125

PMT((1+12%)^(1/12)-1,12*13,0,-19009858,1)

D)

Amount required by Priyanka after 3 years=Rs 20 lakhs

(FV after three years)

2000000 This is the value on 26th year

Amount earmarked for the same=Rs 5lakhs

FV(6%,3,0,-500000,1)

595508 value after 3 years

Future value of the remaining amount=Rs 14,04,492

Rate of return of Money Market MF
Quarterly effective rate of return

1404492 2000000-595508
6.00% p.a.
1.4674% (1+6%)^(1/4)-1

Quarterly amount required to be invetsed to attain the goal for the next three years
Alternative method
PV
500000
FV
2000000
pmt
(106333) PMT(1.4674%,12,-500000,2000000,1)

FPSB India/Public

(106333) PMT(1.4674%,12,0,1404492,1)

FPSBI/M-VI/05-01/09/WN-13

17)

B)
Present Personl loan
Tax outstanding
Total Amount outstanding

150000
100000
250000 150000+100000
5885 PMT(24%/12,3*12,-150000, 0)
211857 5885*(3*12)
61857 211857-150000

EMI for Rs 150,000 for 3 years @24%

Total Amount payable

Interest payable

5498 PMT(19%/12,3*12,-150000, 0)
197943 5498*(3*12)
47943 197943-150000

EMI for Rs 1,50,000 for 3 years @19%

Total amount payable

Interest payable

9164 PMT(19%/12,3*12,-250000, 0)
329904 9164*(3*12)
179904 329904-150000
Renewed (10 Yrs)
Existing (8 Yrs)
6.00%
8.00% Interest Payable
33306
42410
3996738
4071364
996738
1071364
74626 interest saved

EMI for Rs 2,50,000 for 3 years

Total amount payable

Interest payable

EMI on 30 lacs

Total amount payable

Interest payable
Gross EMI payable after rescheduling
Interest saved after rescheduling
18)

C)

19)

C)

20)

A)

21)

C)

22)

D)

Amount
1 year

31-Dec-2009

61857-47943

1071364-996738

42470 33306+9164
88540 13915+74626

Annual rate MMMF

Halh-yaerly rate MMMF
Annual rate Equity MF
Halh-yaerly rate Equity MF
Dates
Portfolio

1-Jan-2009

13915 interst saved

6.00%
2.9563% (1+6%)^(1/2)-1
12.00%
5.8301% (1+12%)^(1/2)-1
Withdrawn

Amount
5800000
6148000

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13

1.5 year
2 years
3 year
5 year

1-Jan-2010
30-Jun-2010
1-Jan-2011
31-Dec-2011
1-Jan-2012
31-Dec-2013

4148000
4270627
4519607
5061960
2061960
2586523

Deficit
23)

2000000
0
0
3000000
0
2586523
-413477 2586523-3000000

D)
Date

Outstanding
Balance

Withdrawal

1-Apr-08
1-Jul-08
1-Oct-08
1-Jan-09
1-Apr-09
1-Jul-09
1-Oct-09
1-Jan-10
1-Apr-10
1-Jul-10
1-Oct-10
1-Jan-11
1-Apr-11
1-Jul-11
1-Oct-11
1-Jan-12
1-Apr-12
1-Jul-12
1-Oct-12
1-Jan-13
1-Apr-13

Quaterly Contribution

182614

Interest paid

14000
14000
14000
14000
14630
14630
14630
14630
15288
15288
15288
15288
15976
15976
15976
15976
16695
16695
16695
16695

256023

337951

429198

530635

643205

0
0
0
0
17409
0
0
0
23408
0
0
0
30094
0
0
0
37531
0
0
0
45790

(182614+14000)*0.08+14000*0.08*3/4+14000*0.08/2+14000*0.08/4

(256023+14630)*0.08+14630*0.08*3/4+14630*0.08/2+14630*0.08/4

(337951+15288)*0.08+15288*0.08*3/4+15288*0.08/2+15288*0.08/4

(429198+15976)*0.08+15976*0.08*3/4+15976*0.08/2+15976*0.08/4

(530635+16695)*0.08+16695*0.08*3/4+16695*0.08/2+16695*0.08/4

Equity MF Scheme
Year

Accumulated Amount

1-Apr-08
1-Apr-13
24)

520000
916418 520000*(1.12)^5

B)
Mutual Funds
600000
60000 Units
Car Market
Value

Market Value

750000 60000*12.5

500000

FPSB India/Public

FPSBI/M-VI/05-01/09/WN-13
Car Loan O/S
250000
Net Value of Car Available
Total Amount Available
New Car Value
Loan Taken

250000 500000-250000
1000000 750000+250000
1200000
200000 1200000-1000000

EMI for Loan

8.75% compounded quarterly
9.0413% p.a. effective
(1+0.0875/4)^4-1
A monthly compounded rate equivalent to 9.0413% p.a. effective
0.7239% (1+9.0413%)^(1/12)-1
EMI
17461
PMT(0.7239%,12,-200000,0,0)
25)

A)

26)

A)
Sum Assured
Premium
No. of prem paid
Total No. of prem payable
Paid Up Sum Assured

3000000
55000 half yearly
26
40
(No. of premium paid/Total No. of premium payable) * Sum Assured

Vested bonus
Paid up Value
27)

1950000 26/40*3000000
850000
2800000 1950000+850000

B)
Portfolio Amount
600000
The portfolio weight for
XYZ
400000 400000/600000
ABC
200000 200000/600000
Exepted Return of ABC
Exepted Return of XYZ
Expected Return of the Mr. Om Prakashs Portfolio is:

66.67% 400000/600000
33.33% 200000/600000
15.00%
18.00%
17.00% 0.67*(18)+0.33*(15)

Standard Deviation of ABC

Standard Deviation of XYZ
The Coeficient of correlation
The variance of the portfolio is:
Standard Deviation of the portfolio

0.18
0.22
0.70
374.31 (0.67)^2 * (22)^2 + (0.33)^2 *(18)^2 + 2(0.67)*(0.33)* 0.7 * 22*18
19.35 (374.31)^(1/2)

FPSB India/Public