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m A client named Ramesh wants advice in


his investment related matters.
m Ramesh is 45 years old & has bank
balance Rs.6 lacs & will retire at the age
of 60 yrs.
m Present salary: Rs.4 lacs per year.
m Wanted to invest in stocks & Bonds
equally
m He believes that bonds & stocks will
provide returns of 7 & 13% respectively.
-
 
m GIVEN:-
m Present salary: Rs.4 lacs per year.
m He is expecting the salary to be
increased @ 12% every year till
retirement
m He plans to work for 15 more years
i.e. till retirement
m Future value?
 

· aince it is the case of compounding
so:
· FVn = PV*(FVIF)12,15
· Where, PV= 400,000
· Rate= 12%
· Time= 15 yrs
· = 400000*5.474
· = 2189600
’

  

] 
· Bank balance= Rs.600000

· Nothing is specifically mentioned so


an equal amount of Rs.3 lacs is
allocated to both stock and bonds for
a time period of 15 years.
 
Rate of interest = 7%
PV= Rs 300000
n= 15 years
FVn= PV*(FVIF)r,n
= 300000*(FVIF)r,n
= 300000*(FVIF)7,15
= Rs 300000*2.759
= Rs 827700
]

· Rate of interest = 13%


· PV = Rs 300000
· N = 15 years
· FVn = PV*(FVIF)r,n
= 300000*(FVIF)13,15
= 300000*6.254 = Rs. 1876200
· Total of investment =stock + bond returns
= Rs 827700 + Rs 1876200
= Rs 2703900
-
 
· Withdrawal of Rs 500000 for 15
years from 60 years to 75 years
· Withdrawal =Rs 500000*15
· = Rs 7500000
And actual returns of Rs
(2703900+2189600) = Rs 4893500
Thus, a withdrawal of Rs 500000 per
year is not possible.
-
 
- ’ 
’
]’
 
· Future Value = 1000000
· n = 15 years
· Rate of interest = Assume 10%
· Here it is the case of Discounting
so:-
PVn = FV*(PVIFA)r,n
= 1000000*(PVIFA)10,15
= 1000000*7.606
= Rs 7606000
-
 
DONATION
· Donation amount = 200000 for 3 years
· FV = Rs 600000
· N = 3 years
· Rate = assume10%
· PVn = FV*(PVIFA)10,3
· = 600000*1.331
· = Rs 789600
-
 
· Present value of his lifetime salary:-
Present salary = 400000
Discounted rate = 8%
 
 
· Time period for bonds and stock is
taken as 15 years in absence of any
information.

· In Bequeath of Rs 1000000 to his


children and in donation the rate of
interest is assume to be 10%.

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