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Retirement Planning & Employee Benefits.
Supplementary Workbook
DrShivaniRajanShirsatCERTIFIED FINANCIAL PLANNER
CM
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1. Mrinal 25 years old, employed with an MNC since last six months is aware of the
importance of financial planning. She has opened a fixed deposit account in a bank to
accumulate funds for her retirement. She has decided to invest the Rs.70000 per year for
this till her retirement at the age of 60 years. She is looking at a lifestyle after retirementthat fits into a fixed Rs. 4lakhs p.a. spend for 20 years. What is the corpus required at the
time of her retirement and is her savings sufficient to take care of her retirement needs?
Assume a rate of 6%p.a earned on her funds after retirement. (Assume all funds requiredat the beginning). The current Fixed deposit rate is 8%p.a
a.Rs.48,63247, Yes Rs.1,20,62176
b.Rs.48,63247, Yes Rs.1,30,27150
c.Rs.45,87968, Yes Rs.1,20,62176d.Rs.45,87968, Yes Rs.1,30,27150
Solution A
Pmt = 400000, n =20, I =6%, mode = begin, PV =4863247Pmt = -70000, n=35, I =8%, mode = begin, fv = 12062176
2. Suresh Kumar retired from XYC Ltd. After serving for 30 years 9months. Salary at
retirement was Rs.15500 pm, while average salary drawn for the preceding 10 months
was Rs. 10800pm. The actual amount of gratuity received by him at the time ofretirement was Rs 335000/-. Calculate the amount of gratuity exempt from tax, assuming
that Rajesh is covered by payment of Gratuity Act 1972?
a.315000b.175673
c.181730
d.277212
Solution D
As he is covered under the gratuity act the amount of gratuity as calculated by the act will be
exempt subject to a max of 350000/-. 15/26 X 15500 X 31 = 277211.54
3. Rajkumar is 32 and plans to retire at 60 years. According to the calculations of his
financial planner he will require inflation adjusted Rs.150000 at the end from the firstmonth after retirement. Inflation is 5%p.a. & return on investment is 7%p.a. Whatll be
the corpus at the time of retirement in order to meet this? Will Rajkumars corpus be
enough to fund his retirement if he saves Rs. 4lakhs pa. ? (End of year). Life expectancy85 years.
a.Yes, Rs. 35779618
b.Yes, Rs. 32279076
c.No, Rs. 32279076d.No, Rs. 35779618
Solution D
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Inflation adjusted rate = ((1.07/ 1.05)-1/) x 100 = 1.904761905 /12 = 0.1587301587
Mode = end, n = 25 x 12 = 300, I = 0.1587301587, pmt = 150000, PV = 35779618N = 28, mode = end, pmt = -400000, I = 7%, FV = 32279076
4. A perpetual bond of Rs.10000 is selling at Rs. 9500. The coupon rate is 12.5% and the
discounted rate is 15%. Whatll be the value of this bond and YTM?a.Rs. 9500 & 15%
b.Rs. 9660.67 & 15.59%
c.Rs.8333 & 13.157%d.Rs.8000 & 13.571%
Solution CValue of a perpetual bond = pmt / I = 1250/15% = 8333; YTM = 1250/9500 = 13.15789%
5. Mr. Ashay 30 years wants to retire at 60; he has a life expectancy of 75 years. Currentexpenses are Rs.200000 annually. He estimates no reduction of expenses post retirement.
How much should he save per annum to achieve his target, if inflation is 6% and yieldfrom investment is 10%. He does not wish to leave an estate.
a.Rs 153475b.Rs.143789
c.Rs 128954
d.None
Solution A = 153475
Fv of expenses; n = 30, mode end, I = 6%, PV = -200000; FV = 1148698.235Mode = begin, n = 15, I = 3.773584%, pmt = 1148698.235, PV = -13465941
Mode = end, n = 30, I = 10%, FV = 13465941, pmt = 81862.79
6. Bimla is working with zonal international as an accountant for the last 12 years. To
supplement her earnings she was doing part time assignment in partnership entity DFCassociates. She retired from both at 60 years and received Rs. 3lakh and Rs. 1 lakh as
gratuity from Zonal International & DFC. In the previous year. What is the maximum
amount of gratuity received by her which is exempt from tax? Both the organizations are
covered under the payment of gratuity act.a.Rs. 3lakhs
b.Rs. 3.5 lakhs
c.Rs.1lakhd.Entire 4 lakh is exempt since it is received from 2 employers.
Solution B = 3.5 lakhsAs per the gratuity act 1972, gratuity received from by an employee from more than one
employer in the same previous year the maximum amount of gratuity exempt from tax u/s
10(10)(iii) cannot exceed Rs 350000/-
7. How is past service defined under EPS 1995?
Solution: The past service under the EPS scheme means the period of service by a member
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before the eps became effective i.e. up to 15 11 -1995 as a member of the erstwhile Family
Pension Scheme.
8. ____ of a client is simply the excess of assets over liabilities.
a. Net worth
b.
Net lossc. Gross worth
d. Gross loss
Solution: A
9. Rate of wage to be paid to a monthly rated employee, under payment of gratuity actis.____ for each completed year of service or part thereof in excess of six months.
a.7 days wagesb.30 days wages
c.15 days wagesd.26 days wages
Solution: C
10.Rate of wage to be paid to a seasonal employee, under payment of gratuity act is
a.15 days wages
b.30 days wages
c.7 days wagesd.26 days wages
Solution: C
11.A scheme providing pension benefits as per IT provision is called ____
a. Pension scheme
b. Retirement Scheme
c. Superannuation
d. Retirement income schemeSolution C
12.Vaishali is working with F ltd from October 1st
1995. She is entitled to a basic salary of
Rs. 6500 per month. DA is 40% of basic salary. She retired on Jan 1st
2009. Benefits
received Gratuity Rs. 95000, Pension from Jan 1st09 Rs. 1500pm. Payment from
recognized PF Rs. 250000. Encashment of earned leave for 150 days Rs.36000. She was
entitled to 40 days leave for every completed year of service. Got 50% of her pension
commuted in lumpsum w.e.f. April 1st
09 and receives Rs. 120000/- as commutedpension. Vaishali contributes Rs.900 per month to RPF to which her employer
contributes an equal amount. What will be the amount of uncommuted pension forVaishali that will form part of her total income for Ay09 10?
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a.4500b.Nil
c.1000
d.6000
Solution A = 4500
Pension received for Jan, Feb., & March
13.Mr. Manish is working with Y ltd from October 1st
1993. He is entitled to a basic salary
of Rs. 6000per month. DA is 40% of basic salary. He retired on Jan 1st
2009. Benefits
received Gratuity Rs. 98000, Pension from Jan 1st
09 Rs. 2000pm. Payment from
recognized PF Rs. 300000. Encashment of earned leave for 150 days Rs.36000. he wasentitled to 40 days leave for every completed year of service. Got 50% of his pension
commuted in lumpsum w.e.f. March 1
st
09. What amount of leave encashment is eligiblefor tax exemption for Manish?
a.Actual encashed
b.Nilc.10 months average salary
d.None of the above
Solution = BLeast of
10 x 8400 = 84000
Actual received = 36000
Statutory limit = 30000015 x 40 = 600days, actually taken 150 days, 600 150 = 450,
As per act 15 x 30 = 450, therefore balance 450 450 = 0,.
14.Mohan is an employee having an average balance of Rs.70000 in the PF for the last 12
months. Unfortunately he dies in an accident. What will be the maximum amount ofinsurance cover payable to his nominee under the EDLI scheme?
a.60000
b.60000c.48750
d.47250
Solution D
35000 + 25% (70000 35000) = 47250
15.If nominal rate of interest is 12% and compounding is done monthly what would be the
effective rate of return?a.12.58%
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b.12.61%
c.12.68%d.12.75%
Solution C
N = 12, I = 12%, effective rate = 12.682%
16.Given a) Personal consumption of goods & services = 250 Billion, B) Government
expenditure = 75billion C) Private sector fixed capital expenditure = 50 billion D) Exportreceipts = 75 billion E) Import expenditure = 80 billion. What will be the value of GDP?
a.425 billion
b.370 Billionc.295 billion
d.265 billion
Solution: B
250+75+50+75-80 = 370 billion
17.Kartik decides to accumulate 45 lakhs when he retires. He is 30 years old and wants toretire at 60. Interest rate is 9% pa. & inflation is 5%pa.Compounding to be done on
annuity certain basis. If Kiran could save only Rs.45000 pa for the first 10 years how
much does he need to save for the next 20 years to meet his retirement nest egg?a.Rs. 85477pa.
b.Rs. 79250 pa.
c.Rs. 98450 Pa.d.Rs. 13064pa.
Solution D
Mode = end, n = 10, i = 9%, pmt = -45000, FV = 683681.8373,
PV = -683681.8373, mode = end, n = 15, I = 9%, FV = 4500000, pmt = 13064.20
18.Narayan is working in USA for 10 years. He is aged 40, and saving Rs. 8lakhs pa. For the
past 10 years and hopes to save for the next 5 years. He would like to return to India 5
years from now. The inflation adjusted monthly income requirement for Laxman is Rs.80000 in the year in which he returns to India. Established that inflation is 3% for the
next 30 years. Life expectancy is 70 years. If the estimated spend for the family is Rs.
90000pm & is growing at 4% p.a how long will his savings last? Assume thatInvestments earn 6% pa., compounding done on annuity certain basis?
a.No, lasts until 81 years old
b.last until 71 years old,c.will exhaust before 71
Solution CMode = end, n = 15, pmt = -800000, I = 6%, FV = 18620775.91;
Mode = end, I = ((1.06/1.04)-1)/12, = 0.160256410, PV = -18620775.91, pmt = 90000, n
=251.56 months; n =20.96 years. i.e. 45 + 20.96 = 65.96 years
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19.Mr. Swapnil will start receiving a pension of Rs.12000 pa., exactly 10 years from now.He will receive this pension for 20 years every year end and interest rate is 12% what is
the present worth of his pension?
a.Rs 32323
b.Rs.28860c.Rs.83667
d.Rs.32257
Solution B
Mode = end, I = 12%, n = 20, pmt = 12000, PV = 89633,
Mode = end, I =12%, n = 10, FV = 89633, pv= 28859.5
20.Bond Face value Rs 1000 and coupon rate 9% with market rate is 10%. If the bond is
perpetual the value of the bond is ______.a.900
b.750c.1000
d.1200
Solution A
Price = 80/10% = 800
21.Ram has received gratuity of Rs. 75000/- in the year 2000 of which the entire amount
was exempt. In the year 2006 he received an additional gratuity of Rs. 300000/-. Theamount exempt from tax will be _____
a.350000b.275000
c.300000
d.None of the above
Solution B, 350000 75000 = 275000
If an employee who has received gratuity in any earlier year from his former employer(s),
receives gratuity from another employer in a later year, the afore said limit of Rs.350000/- willbe reduced by the amount(s) of gratuity exempted from tax under sector 10(10)(iii) in any earlier
year(s)
22.An employee contributes Rs.5200/- each month with a similar amount contributed by the
employer to a recognized provident fund. What is the tax benefit available to the
employee on the contributions made by the employer?a.Amount in excess of 12% is included in gross salary.
b.Exempt upto 12% of salary.
c.Not exempt but also not taxable every year.d.No tax benefits available
1.All of the above
2.only C & D
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3.Only A & B
Solution: 2
23.An individual invests Rs 50000/- in his PPF account. While having a deduction of Rs.
24000/- during the year as provident fund. Further insurance policies of Rs. 50000/-premium were purchased. What is the tax benefit available at the end of the year?
Solution Rs.100000/-
24.An investor buys a pension policy from an insurance company after paying a premium ofRs. 24000/- Other insurance premium paid is to the extent of Rs 94000/-. What is the
total amount of benefit of tax available u/s 80c & 80 ccc?
a.118000b.100000
c.94000d.nil
Solution B Rs 100000/-
The maximum limit of benefits available under section 80C & 80CCC is Rs.100000.
25.A person has a basic salary of Rs. 35000/- per month & there is a provident fund
deduction of 10% towards a recognized provident fund. How much will be the tax benefitavailable for the individual?
a.Deduction u/s 80C available on Employees contribution from gross totalincome subject to certain limits
b.Exemption upto 12% of salary. Amount in excess of 12% is included in gross
salary.c.Interest on Provident fund exempt u/s 10 upto 9.5% p.a. Interest credited in
excess of 9.5% p.a. is included in gross salary.
d.No exemption available.
1.A B C2.A B C D
3.A B
4.A C
Solution 1 (A B C)
26.An employee wants to decide between contributing a sum of Rs 3500/- pm either to the
provident fund or the public provident fund. The tax benefit in the two cases for theemployee will be _____
a.Exempt under section 80CCC
b.Exempt under section 80D
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c.Exempt under section 80C
d.No tax benefits availableSolution C
Exempt under section 80C
27.An employee joined service in May1999 & left it on Jan2006. at the time of resignationhe received a sum of Rs.254000/- as accumulated balance from recognized provident
fund. The amount that is taxable is ____.
a.Rs 254000b.NIL, The entire amount is exempt
c.None of the above
Solution B
As he has completed more than 5 years of continuous service in the company the entire amount
received is exempt..The accumulated balance due & becoming payable to an employee participating in a recognized
PF shall be exempt in the following cases1.If the employee has rendered continuous service with his employer for a period of 5 years
or more ,or2.If, though he has not rendered such continuous service of 5 years, the service has been
terminated a) by reason of such employees ill health or b) by the contraction or
discontinuance of the employers business or c) or other cause beyond the control of theemployee, or
3.If, on the cessation of his employment, the employee obtains employment with any other
employer, to the extent the accumulated balance due and becoming payable to him istransferred to his individual account in any recognized fund maintained by such other
employer.
28.Jatin is 40 yrs old. He earns Rs 2.8lakhs a year currently. If his earnings rise 8% for the
next 15 years & he wants a replacement ratio of 80%, what will be his requirement at thetime of retirement?
a.701555
b.710566c.710655
d.701655
Solution B
Mode = end, n = 15, I = 8%, PV = -280000, FV = 888207.3520, 80% x 888207.3520 = 710566
29.The current income of a person is Rs. 4lakhs pa. He wants a sum of Rs. 5lakhs at the
replacement ratio of 80% in 5 years time. By what rate should his income increase to
provide such a benefit?a.7.33%
b.8.33%
c.9.33%
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d.10.33%
Solution CFv =500000/80% = 625000
Mode = end, n = 5, PV = -400000, FV = 625000, I = 9.33%
30.If a person wants a sum of Rs 42000/- pm at a replacement ratio of 70%, what should hisnormal earning be at the time of retirement?____
a.4.2 lakh
b.5.6 lakhsc.6.4 lakhs
d.7.2lakhs
Solution D
42000 x 12/ 70% = 7.2 lakhs
31.A sum of Rs. 4.8lakhs at 60% replacement will mean a person has to earn before
retirement a sum of ______a.5lakhs
b.6lakhsc.7lakhs
d.8lakhs
Solution D
480000/60% = 800000
32.The pension received by a person is Rs. 6000/- pm. If the other income after deductions is
Rs. 1lakh for a male individual, then the pension received is taxable to the extent of ____a.6000
b.12000
c.72000d.44000
Solution C
6000 x 12 = 72000
33.If the income from a senior citizen savings scheme for a 63 year individual is Rs105000/-
and there is no other income then the amount of ------ is taxable.a.Nil
b.5000
c.10000d.500
Solution A
34.If there is a deposit of Rs. 70000/- in a 8% pa deposit for 270 days then will there be a tax
deduction at source on the interest paid?
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a.No
b.Yesc.Cant say
d.None of the above
Solution A
35.A person wants to invest Rs 4 lakhs in a post office monthly scheme.a.it can be done in a single name
b.it can be done in a joint name
c.there is no bonus on maturityd.both a & b are correct
e.only B is correct
Solution: D
As per the POMIS rules up to 4.5 lakhs can be invested in a single name & up to 9 lakhs can beinvested in a joint name
36.A provident fund account is closed and the amount is withdrawn by the individual after 4
years. The amount received here is ______
a.taxableb.not taxable
c.none of the above
Solution A
37.A provident fund account is transferred after 4 years of operation to another employer theearning in this case is ____
a.taxable
b.not taxablec.none of the above
Solution B
38.An amount of Rs.100000/- is invested in a notified pension scheme of a mutual fund ---
will be allowed as a deduction under section 80c
a.100000b.10000
c.Contributions to pension funds of mutual funds do not qualify for 80C
deduction.d.Nil
Solution A
39.Neha received inheritance of Rs 2.5 lakhs, wants to withdraw equal amounts at the
beginning of each month for next 7 years at 10%pa compounded monthly. What amount
she should start withdrawing per month?
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a.4116
b.2266c.4150
d.2626
Solution AMode beginning, n = 7x12, i=10%/12, PV = -250000 PMT = 4116
40.Ram has bought the share of ABC ltd. For Rs. 80000. They grow to Rs. 90000 in
182days.
a.What is the return?b.What is the annualized return?
1.12.5%, 25.06%
2.11.5%, 25.06%3.12.5%, 25%
4.None of the above
Solution A10000/80000 = 12.5%, 12.5x 365/182 =25.06%
41.Ms. Madhu is 40 yrs old to retire at 65. Life expectancy is 75 yrs. She will require
5000 in 1st
month after retirement. Inflation 4% p.a. , rate of return 7% . What is
the corpus required to meet the expenses after retirement. Will the corpus beenough to fund her retirement if she saves up to Rs. 30,000 pa (at the end of the
year)
a. 1478597, Yes
b. 1687498, Noc. 1984571, No
d. 1562027 , Y
Solution DRetirement corpus pmt = 15000, n =10 x 12, I = ((1.07/1.04)-1)/12 = .24038, PV = 1562031
Savings corpus mode end, n = 25, I =7%, pmt = -30000, FV = 1897471.131
42.Nirav wants to retire at 45 and he wants to maintain his present standard of living.
He spends 325000 a year. He is expected to live up to 85. Inflation 4% expected
return 7% pa . How can he achieve this? He is at present 30 yr. What is the nestegg required at age 45 and what amount shall he save every year to meet this
plan? His present investment is Rs.10, 00,000.a.Nest egg and saving required will be 25100065 and 541093 resp.
b.Nest egg and saving required will be 12773065 and 438300 resp.c.Nest egg and saving required will be 13785155 and 438781 resp.
d.Nest egg and saving required will be 14773065 and 740530 resp.
Solution C
Find FV45, n = 15, I = 4%, PV = -325000, FV = 585306.64 = pmt for 40 years,
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I= 2.88461545, n =40, pmt = 585306.64, PV 45 = 13785170
Savings per yearI = 7%, n =15, PV = -1000000, FV = 13785170, pmt = 438781.06
43.Mira aged 30 saves Rs. 15000 per year (at the end) in Bank FD earning 8.25%
P.a. compounded annually until she retires at 58. Life expectancy is 80 yrs.Calculate the Corpus on the date of retirement? What is the fixed amount she can
Withdraw at the beginning of each yr until 80 in case she wishes to exhaust her
corpus completely. Inflation rate is 5% pa.a. 1424894, 89458
b.1348974, 87498
c. 1491655, 137767d. 1491655, 91613
Solution D
Mode = end, pmt = -15000, i= 8.25%, n =28, FV = 1491655,Mode = beginning, n =22, I = 3.09%, PV = -1491655, pmt = 91612.558
44.Rekha 20 yrs retired at 45. Life expectancy is 70. She requires 55000 in the first month of
her retirement. Inflation rate is 4% pa; rate of return is 6% pa. What will be the saving peryear required in order to meet this.
a. 232584
b. 235789c. 236478
d.238615
Solution D
Mode = end, n = 25 x 12, pmt = 55000, I = 0.019230769 / 12, PV =- 13091516.01
N= 6%, n = 25, FV = 13091516.01, pmt = 238615.37
45.Mr. Prakash is 35 yrs old wants to retire at 60. Life expectancy is 80 yrs. He will
require 25000 in 1st
month after retirement. Inflation is 5% p.a , rate of return 8% .What is the corpus required to meet the expenses after retirement. Will the corpus
be enough to fund her retirement if he saves upto Rs. 48,000 pa (at the end of the
year)a. 4129874, Y
b. 4784962, N
c. 4566431, Nd. 4378154, Y
Solution CMode = end, n = 20 x 12, i = 2.857142857 / 12, pmt = 25000, PV = -4566431
Saving corpus; mode = end, n = 25, I = 8%, Pmt = -48000, FV = 3509085.118
46.Kalpesh wants to accumulate Rs. 50 Lakh when he retires. He is 30 yrs and wantsto retire at 55 yrs. Interest rate 9 % pa, inflation 5% pa.. Compounding to be done
on annuity Certain basis. After 10 yrs of his saving 45000pa. Kalpesh now
realizes he can now earn12 % pa on fresh investment and also maintain a saving
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amount of 72000 pa for the rest of the working life. Will he be able to accumulate
the amount required? What will his corpus be?a. Y , 51.74 Lakh
b. N, 48.75 Lakh
c. Y, 52.5 Lakh
d. N, 49.50 LakhSolution A
Mode = end, n = 10, I =9%, pmt = -45000, FV = 683681.8373;
PV = - 683681.8373, n =15, I = 9%, mode = end, FV = 2490299.1Mode = end, I = 12%, n = 15, pmt = -72000, FV = 2684139.456
Total savings 2490299.1 + 2684139.456 = 5174438.556
47.Krishna aged 30 saves Rs. 10000 per year (at the end) in Bank FD earning 8% p.a. Comp
annually until he retires at 60. Life expectancy is 80 yrs. Corpus on the date of
retirement? What is the fixed amount he can withdraw at the beginning of each yr until80. Presuming he wishes to leave his heirs an estate of Rs.200, 000 .Inflation rate is
constant at 6% pa.a. 1105694, 61375
b. 1132832, 12787c. 1054875, 108423
d. 1132832, 59040
Solution DMode = end, n = 30, I =8%, pmt = -10000, FV = 1132832.
Mode = beginning, n =20, FV = 200000, I = 1.88%, PV = -1132832, Pmt = 59040
48.Manoj 30 yrs employee earning salary of Rs. 300000. He started saving 10 % of
his salary, at the end of the year, in a saving plan which yields 6% interest pa. HisSalary increases by 5% pa. If Manoj intends to prepone his retirement to the age of
55 yrs and needs to have the same amount of accumulated saving as at the age of
60 yrs. What percentage of his salary should he start saving to achieve his goal.a. 14.04%
b. 3.56%
c. 15.70%d. 6.70%
Solution C
= 30000 x [(1.06)^30 (1.05)^30] / (0.06 -0.05) = 4264646.395
4264646.395 = x [(1.06)^25 (1.05)^25]/ 0.06 0.05 =47096.3233647096.32336 / 300000 = 15.698%
49.Ramesh retired from PTC completed service of 29 yrs 9 month. His salary atretirement was Rs. 10,500 p.m. While average salary of preceding 10
months worked out to Rs. 9800 p.m. The actual amount of gratuity received by
him at retirement was Rs.325000. Calculate the amount of gratuity exempt fromTax assuming he is covered by provision of Payment of gratuity Act 1972.
a. 294000
b. 181730
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c. 315000
d. 175673Solution B
Covered under the gratuity act therefore gratuity exempt will be least of actual received, max
limit Rs.300000, or calculated as per the act as 15 X 10500 X 30 = 181730
2650.Shinde invested Rs. 72000 at the rate of interest of 5%. After 7 yrs the ROI is 5%
compounded half yearly. After 3 yrs ROI is 6% compounded quarterly. What will
he get after 15 years.a. 140000
b. 155000
c. 148251d. 158242
Solution D
Mode = end, PV = -72000, n = 7, I =5%, FV = 101311.2304,PV = -101311.2304, n = 3 X 2, I = 5% / 2, FV = 117489.9671,
PV = -117489.9671, n = 5 x 4, I = 6% / 4, FV = 158241.9504
51.Harinder has heard that changes in inflation rate might have a significant impact on his
real saving. Currently he would buy the car of his dreams for Rs. 3 Lakh. He wants to
estimate the amount he may need to buy the car in 8 yrs time. The inflation rate for the
period are expected to be 5% for 1st
four year, , 4 % for next four year value of the car is
expected to fall by 10 % every time over a period of 4 yrs. If he buys the car in 8 yrs thenwhat would be the same real amount that he would need to have saved.
a. 345539
b. 400000
c. 383932d. 426591
Solution A
Mode = end, PV = -300000, n = 4, I = 5%, Fv = 364651.8750PV = -328186.6875, n = 4, I = 4%, FV = 383932,
Amount needed as value of car will reduce by 10% = 345539
52.Ram aged 35 saves Rs. 30000 per year (at the end) in Bank FD earning 7% p.a. comp
annually until he retires at 60. Life expectancy is 70 yrs. Corpus on the date of
retirement? What is the fixed amount he can withdraw at the beginning of each yr until70. Presuming he wishes to leave his heirs an estate of Rs. 150,000.Inflation rate is
constant at 5% pa.a. 1897471, 242337
b. 2147854, 214598c. 1745897, 192712
d. 1945875, 199145Solution A
Mode = end, n = 25, I = 7%, FV = 1897471,
As inflation is constant we will use nominal rate of 7% in post retirement phase.
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PV = -1897471, FV = 150000, N=10, I =7%, PMT = 242337
53.An employee retires on 10th
Mar 06. Salary during 1- May-2005 to 31-Dec-2005is Rs. 26000 pm. 1- Jan-2006 to 28-Feb-2006 is Rs. 26500 pm. Besides he
receives Rs. 400/- pm. as DA. 20 % Basic Pay as DA (not part of salary forcomputing of retirement benefit). He is entitled to 6% commission on sales
achieved by him (during 1-May-2005 and 28-Feb-2006 turnover achieved by theemployee is 2577860) . He received a gratuity of Rs.750000/- and has worked for
26 yrs and 5 month in the organization calculate the tax free and taxable amount
of gratuity resp.a. 350000, 741142
b. 350000, 400000
c. 750000, 341142d. 750000, 400000
Solution = B
x 26 x 41967 = 545573, As payment is least of 350000, actual received or as calculatedLeast is 350000, is exempt gratuity therefore balance 400000 is taxable
54.Mohan invests Rs 10000 in mutual fund on 1/1/2000.He receives cash dividend
Of Rs 200,300,200,300 on31/12/2000, 2001, 2002 & 31/12/2003.He sold the fundFor Rs 15000/- on 1/1/2004.What is IRR?
a. 12.81%,b. 10.21%c. 6.83%,
d. 8.53%
Solution A
Cash flow -10000, 200,300, 200,15300 IRR =12.81%
55.Amit aged 30 yrs has an estimated present expense of Rs 360,000p.a.If inflation is
5% in first ten years, 6% in next ten years, & 6.5% for rest of the years. Whatwould be household expenses required at age 60 yrs if to maintain standard of
leaving is 80% post retirement.
a. 11.5 lacs,b. 15.77lacs,
c. 16.31lacs,
d. 8.53lacsSolution B
Mode = end, n = 10, I =5%, PV = -360000, FV= 586402.0656N =10, I = 6%, PV = -586402.0656, FV= 1050156.788
N= 10, I =6.5%, PV = -1050156.788, FV = 1971288.652Retirement expenses = 80% x 1971288.652 = 15.77 lakhs
56.Mr. Kalpesh decides to accumulate Rs 50 lacs when he retires. He is at present 30
yrs old & wants to retire at 55yrs .Assume interest rate 9% and inflation 5%
compounding to be done on annuity certain basis. If Mr. Kalpesh could save only
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Rs 45000/- for the first ten years ,how much he need to save next 15 years to meet
his retirement corpus.a) 147008 p.a,
b) 85477 p.a,
c) 98450p.a,
d)
79250 p.aSolution B
N=10, mode = end, I = 9%, pmt = -45000, FV = 683681.8373
N = 15, mode = end, I = 9%, PV =-683681.8373, FV = 5000000, Pmt = 85477
57.Mr. Alpesh decides to accumulate Rs 50 lacs when he retires. He is at present 30
Yrs old & wants to retire at 55yrs .Assume interest rate 9% and inflation 5%Compounding to be done on annuity certain basis. If Mr. Kalpesh could save only
Rs 45000/- for the first ten years , After this he realizes that he can now earn 12%
P.a on fresh investment and also increases his investments amount to 72000/-p.a. For the rest of the working life. Will he be able to save the required amount?
What will be his corpus at retirement?a. Yes, 52.50 lacs,
b. No, 48.75 lacs,c. no, 49.50 lacs,
d. yes, 51.74 lacs
Solution DMode = end, n = 10, I =9%, pmt = -45000, FV = 683681.8373
PV = -683681.8373, n= 15, mode = end, I =9%, FV = 2490299
Mode = end, I = 12%, n = 15, pmt = -72000, Fv =2684139 i.e. 2490299+2684139= 5174438.55
58.You have been appointed as financial planner of Mr. Ranjit. He is 35 yrs old atpresent and would be retiring at age 60 yrs. He expects to live up to 80 yrs. You
have to plan in such a way that Ranjit starts getting 25000 pm from the very day he
retires and keep receiving till his survival. If an expected return duringaccumulation is 7%p.a, what is saving required per year to meet his retirement
needs.
a) 47646,
b) 50982,c) 47924,
d) 51280
Solution DMode begin, n = 20 x 12, I = 7%/12, pmt = 25000, pv = -3243372.611
Mode = end, n = 25, I = 7%, FV = 3243372.611, pmt = 51279.39
59.Ms Shalini purchases a money back policy at age of 30 yrs. She gets survival benefit of
Rs 1 lac each in 5,10,15th yr of policy and Rs 4,00,000 as maturity benefit at the end of
20 yrs. She invests entire benefits of this policy at 8%p.a.What is accumulated value ofthis investments to her at age 60 yr.
a) 3037260,
b) 1511247,
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c) 2331730,
d) 1531730Solution C
Pv = -100000, n = 25, I = 8%, FV1 = 684848
PV = -100000, n = 20, I = 8%, FV2 =466096
PV = -100000, n = 15, i = 8%, FV3 = 317217PV = -400000, n = 10, i = 8%, FV 4 = 863570
Total 2331730
60.Mr. Sumit present age 25 yrs wants to retire at 55 yrs .Life expectancy is 70
yrs.He estimates that he will require 35000 pm after retirement. Inflation is 4.5%
and return on investment is 6.5%.What will be saving required per annum?a) 86987,
b)63358,
c) 82689,d) 85479
Solution BMode = end, n = 15 x 12, I = 0.159489633%, pmt = 35000, PV = -5472593
FV =5472593, mode = end, n = 30, I = 6.5%, pmt = 63358
61.Mr. Branden presently 30 yrs old, wants to retire at 45 yrs. He wants to maintain
present standard of leaving .He is currently spends around Rs 3,25,000 p.a. Heexpects to survive upto 85 yrs .Inflation is 4% and expected return on investments
are 7%. What will be nest egg required at age 45 yrs? What amount, he needs to
save every year in the end to meet his plan of retirement. His present savings arearound 10 lacs.
a). 25100065, 541093b) 12773065, 438300
c) 13785155, 438781
d) 14773065, 740530Solution C
Mode = end, I =4%, n=15,PV = -325000, FV = 585307
Mode end, I = 2.88%, n =40, pmt = 585307, PV = -13785155
Mode = end, I = 7%, n = 15, PV = -1000000, FV = 13785155, pmt = 438781
62.Monthly pension of an employee under EPS95, if pension able service is 30 yrs& pension able salary is Rs6000/-
a) Rs6000
b)Rs2571c) 3000
d) 1500
Solution BMonthly pension = pensionable salary x pensionable service/ 70
= 6000x30/70 = 2571
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State whether true or false
68.A senior citizen savings scheme cannot be extended for next three years aftermaturity of account.
a.The above statement is True
b.The above statement is False
c.Neither of the above
Solution B
Senior citizen savings scheme can be extended for 3 years after maturity of account
69.Senior Citizen Savings scheme the interest is payable monthly.
a. The above statement is Trueb. The above statement is False
c. False interest is payable Quarterly
d. Neither of the aboveSolution C
70.The post office recurring deposit account is normally for _____ years.
a.3b.6
c.5
d.2Solution C
71.Can the post office recurring account be continued on maturity?a.No
b.YESc.Yes for another 5 years on year to year basis
d.Yes for three blocks of 5 years each.
Solution C
72.Which post office savings scheme earns rebates for 6 to 12 months advance
Deposits?
a.Post office Time deposit accountb.Post office savings account.
c.Post office recurring deposit scheme
d.There is no such a schemeSolution C
73.Monthly pension of an employee under EPS95, if pension able service is 35 yrs& pension able salary is Rs6000/-
Ans a) Rs6000 b)Rs2571 c) 3000 d) 1500
Solution CMonthly pension = pensionable salary x pensionable service/ 70
= 6000x35/70 = 3000
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74..The current yield of a bond, with coupon rate of 7.5% & market price of Rs.105is ___
a.7.143%
b.7.413%
c.6.143%d.Nil
Solution A7.5 / 105 = 0.0714285 X 100 = 7.143
75.The current yield of a bond with coupon rate of 11.5% is 10.773%. How muchis the price of this bond.
a.. 100
b. 106.75c. 107.76
d. NilSolution B
11.5 / 10.773 = 1.06748 X 100 = 106.75
76.Calculate the bonds price with face value of 100 & coupon rate of 11.5% maturing in 3
years, if the ytm is 9%.a. 106
b.106.3208
c.100d.105
Solution BFv = 100, I = 9%, n = 3, pmt = 11.5, PV = 106.3208
77.What is the price of a bond whose face value is 100 coupon is 10% maturing in 3years if the ytm is 14%
a.90.717
b.90
c.91d.100
Solution AN = 3, I = 14%, FV = 100, pmt = 10 ,PV = 90.717
78.Post retirement your client would require 70% of his current personal annual expenses
adjusted for inflation in the beginning of the first year of his retirement. He also wants to
leave Rs.25 lakh cash, at then prices for both his daughters each as estate. He wants toknow what monthly amount towards his retirement corpus and estate is required to be
invested in an equity oriented Mutual fund from today onwards till his retirement. In the
distribution phase, the corpus is invested in a pension fund yielding annual inflation
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adjusted annuity yielding 100 basis points above risk free rate. To help him in his
financial planning he has provided you with the following information;a. current age 49 years,
b. working in an Indian Multinational company and drawing an annual salary of
Rs. 24 lakh,
c.
his present personal monthly expenses are Rs.65,000,d. his basic salary is Rs. 80,000pm and DA is Rs. 30,000pm of which 100% is
included for retirement purposes.
e. The current inflation rate is 5.5% p.a. and is expected to remain samethroughout.
f. Return on Equity / Equity based Mutual fund is 12%p.a,
g. Risk free rate is 6%p.a.h. Retirement @: 62years of age
i. Life expectancy: 80 years of age.
A. Rs. 74121B. Rs. 51058
C.
Rs. 37075D. Rs.53125Solution: DCurrent monthly personal expenses: Rs. 65000 so annual expenses will be 65000 x 12 = 780000.
He wants 70% i.e 780000 x 0.70 = 546000
First find the rupee value of the expenses in the first year of retirement i.e after 13 years i.e findFV of 546000 at inflation rate of 5.5% after 13 years this is Rs. 1095153.
This is the annuity required every year for 18 years i.e (80 62).
The rate of annuity is 100 basis points i.e 1% above risk free rate of return = 6% + 1% = 7%Inflation is 5.5%p.a
Real rate = [1.07/1.055]-1x 100 = 1.421800948So corpus required at the time of retirement; mode begin, n= 18, i% = 1.421800948, pmt =
1095153, so PV = 17530545.91 [A]
Corpus to leave an estate of 50 lakh for daughtersMode = begin, n = 18, i% = 7, FV = 5000000, so PV = 1479319.58 [B]
Total corpus required at retirement = A + B = 19009858
To accumulate this corpus he wants to invest monthly in an equity MF at 12% p.a. rate.
Now find the monthly effective rate APR using the CNVR function i.e n= 12, i%=12, find APR= 11.38655152, now find the monthly rate i.e 11.38655152/12 = 0.9488792935
Now find the PMT using mode = begin, n=13x12, i% = 0.948879293, Fv = 19009858, pmt solve
= 53124.85
79.NAV of a fund on march312001 was 14.45. 3 months later the NAV had grown to
15.25. using the percentage change in NAV method find out the annualized returnA .22.145
B .22
C .21.145D .nil
Solution A
(15.25 -14.45)/14.45 *100 = 5.536% *12/3
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80.NAV of a fund on Jan 2001 was 15.865. 6 months later the NAV had grown to 16.35.Using the percentage change in NAV method find out the annualized return
A. 6.114
B. 6
C. 5.114D. 5
Solution A
(16.35 -15.865)/15.865 *100 = 3.057% *12/6
81.Mahesh bought units of a mutual fund for 18.225 at the end of the year the worth of his
holding was 18.725 & he had received a dividend of 12 % compute his return usingsimple total return method
A.9.238%
B. 9.328%C. 9
D. NilSolution B
Dividend received 10 * 12% = 1.20, ((18.725-18.225) + 1.20)/18.225 =.9.328
82.Mohan bought units of a mutual fund for 23.75 he receives a dividend of 12.5%
Which he reinvests in the fund at the then prevailing NAV of 23.5 at the end of the yearthe worth of his holding was 24.65. Compute his return using reinvestment method
A. 9.3102%
B. 9.13%C. 9%
D. NilSolution A
Dividend received = Rs.1.25, extra unit purchased = 1.25/ 23.5 = 0.05319, total units = 1.05319,
value of holding at the end of the year = 1.05319 x 24.65 = 25.96117,HPR = (25.96117 23.75)/ 23.75 = 9.3102%
83.Mukesh retired from 30th
June 2007. He received pension of 6000pm till 31st
Dec 2007,
since 1st
Jan 08 he gets 60% of pension commuted for 90000. Calculate amount ofpension includable in salary income for AY 08 09. Assume no gratuity received.
B.52800
C.58200
D.58000E.Nil
Solution B
Uncommuted pension from June to dec07 = 6000 X 6 =36000Total pension = 90000/60% = 150000, can commute 50% as gratuity not received i.e. 75000 as
exempt amount, but commutes 90000 therefore 90000 75000 = 15000 = taxable.; reduced
pension from Jan to March = 2400 x 3 = 7200, total pension 36000 + 15000 + 7200 = 58200
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84.Amar is 30 years old wants to retire at 45 years. He deposits 25000pa at the yearend for
15 years, earning an interest rate of 5%. He wants 75000 pa post retirement. How long
will his corpus suffice him?
F.8 yearsG.9 years
H.8.59years
I.7 years
Solution C
Mode = end, n = 15, pmt = -25000, FV = 539464.09Mode = beginning, I = 5%, pmt = 75000, PV = -539464.09, N =8.59 years
85.Seema aged 35 years requires 20lakhs at age 55. If she starts today using an annualstepped up method. Calculate how much she needs to save in first year to ensure that her
investment plan corresponds with salary growth. Assume interest rate 8%, growth 10%and inflation 4%.
J.17596K.17922
L.17900
M.18900
Solution B
FV = 2000000, n = 20, I = 8%, PV = -429096.4148N=20, rate = (8-10)/1.10 = -1.8181, PV = -429096.4148, pmt = 17922
Alternate method use Goal seek in excel
86.Mr. Prakash is working in an MNC from 1stJuly 1986 and has given a notice on 31stDec
2008 to his employer for relieving him from his job by 31stJuly 2009. Prakash 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. Prakash wants to know the amount of Gratuity he is
likely to get from the company and what amount will be taxable out of the same. Hisbasic salary p.m. is 80000 with DA 30000 p.m. of which 100% is included for retirement
purposes.
N.Rs. 12,24,194 and Rs. 8,74,194
O.Rs.14,59,615 and Rs. 11,09,615P.Rs.9,20,000 and Rs 5,70,000
Q.12,65,000 and Rs 9,15,000
Solution: B
Basic salary: 80000; DA: 30000; no. of years of service: 23; gratuity as per the act = 110000 x 23x 15/26 = 1459615; max exempt = 350000; so taxable gratuity = 1109615.
87.What is the present value of an investment that will be worth Rs 10000 in 10 years based
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on an inflation rate of 4% pa?
R.3855S.5584
T.6756
U.8203
Solution C
FV = 10000, n = 10, I = 4%, PV =6756
88.Ajay opens a saving account on 15th
April 2003 with a deposit of Rs.2000, there after he
deposits Rs.80 into the account fortnightly. How much will the account have on 15th
April 08? Interest rate of 8.3%
A.13933B.14933
C.15933
D.16933
Solution C
PV = -2000, r = 8.3%/26, n = 5 x 26, FV = 3026.7402
Pmt = -80, r = 8.3%/26, n = 5 x 26, FV = 12906.2474Total accumulation = 3026.7402 + 12906.2474 = 15932.9876
89.Jagan, a 45 years old executive earns a salary of Rs. 68000 pa. He will retire at the age of55 years & his life expectancy is 76 years. He expects his current salary to grow by 6%
pa. The inflation rate is expected to be 4% pa. throughout his lifetime & the expected
return on investment is 5% pa. during retirement. If Jagans target replacement ratio is70% of his last drawn salary. Calculate how much he needs as his retirement fund. (
Assume salary increments are given at the beginning of each year.)A.1613980
B.1629499C.197321
D.1992183
Solution B
FV of salary = 68000 x (1.06^10) = 121777.6434
Expected expenses = 70% x 121777.6434 = 85244.35Capital requirement for retirement = pmt = 85244.35, I = (5%-4%) / 1.04 = 0.9615, n =21, PV =
1629499.2989
90.To avail the withdrawal from the PF for the purchase of a ready built house / flat orConstruction of a house the member should have completed 5 years of membership of the
fund and the purchase should be in favour of
A.Member or member & spouse with minimum balance in members account shouldbe Rs.1000/-
B.Member only with minimum balance in members account should be Rs.1000/-
C.Spouse only with minimum balance in members account should be Rs.1000/-
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D.Member & spouse with minimum balance in members account should be
Rs.1000/-
Solution A
91._____ is a single premium market linked deferred pension plan from ICICI PrudentialLife
Insurance Company.
A.Forever lifeB.Life link Pension
C.Life time Pension
D.New Jeevan Dhara I
Solution B
92.Profit Sharing plans are ______
A.Defined Benefit PlansB.Defined Contributions Plans
C.Hybrid PlansD.None of the above.
Solution B
93.Profit sharing plans are
a.Generally not structured to provide a monthly pension benefit at retirementb.Its aimed at offering the employees a way of participation in the companys profit
A.Both statement are falseB. Both statements are True
C. Only A is true
D.Only B is trueSolution: B
94.The administrative charges for the EPS are paid by
a.The employer onlyb.The employer & the government
c.The Central Government only
d.No administrative charges are paid.Solution C
95.Definition of "Family" for the Employees Pension Fund means
(i) wife in the case of male member of the Employees' Pension Fund; (ii) husband
in the case of a female member of the Employees' Pension Fund ; and (iii) sonsand daughters of a member of the Employees' Pension Fund ;
(iv)The expression "sons" and "daughters" shall include children 2[legally
adopted by the member].a.None of the above
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b.All of the above
c.Only 1 & 2d.Only 1,2,& 3
Solution B
96.Administrative expenses for Employees Provident Fund scheme payable by the employer
every month will be ______
a.1.10% of total wages on which Provident fund is recoveredb.a minimum of Rs 5/- payable by the employer every month.
A.Only AB.Only B
C.Both A & B
D.None of the above
Solution C
97. Arun has taken a loan of Rs.450000/-, with a down payment of 20% and installments to
be paid for 15 years at the rate of 12% per annum. Calculate the estimated monthly
installment.a. 4300
b. 4320
c. 3240d. 4000
Solution = B
Find PMT
PV = (450000 90000) = 360000, n = 15 x12, i = 12/12 = 1%, pmt = 4320.605
98.Rajan aged 46 years wants to purchase an annuity when he retires at age 60 years; to be
paid to him or his wife Sumitra aged 43, till any one of them is alive. Life expectancy of
Rajan & Sumitra is 80 & 77 years. What should be the term of this annuity?
a. 20 yearsb. 15 years
c. 21 yearsd. 18 years
Solution: A
Rajan current age 46, age at retirement 60, Sumitras age at Rajans retirement = 57, Sumitras
life expectancy = 77 years so annuity required for 77 57 = 20 years
99.In current times of recession, Sujits company is going through financial crisis. Due to
continuous losses the management has decided to offer Voluntary retirement to its
employees on 1-4-2009. The company has got the VRS scheme approved through IT
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Authorities. He has asked for your advice on net tax proceeds out of his VRS amount of
Rs. 20 lakh. The same will be----a. Rs. 13.21 lakh
b. Rs. 17.60 lakh
c. Rs 14.90 lakhd.
Rs. 15.50 lakhSolution: C
Exempt amount 5lakh so tax on balance amount of 15 lakh @ 33.99% = 509850; therefore thenet proceeds receivable is 1500000 509850 + 500000 = 1490150.
100. Your client Rani wants to invest regularly on a quarterly basis an amount of Rs.6,000 in her PPF A/c for the rest of its tenure. The amounts are proposed to be deposited
in the first five days of July, October, December & April, respectively. She has not made
any transactions in her PPF A/C since April this year. She has approached you on 31st
May 2009 for advice on the same and wants to know the maturity amount on 1stApril
2015 when the account matures. The current balance in her PPF a/c on 31
st
May 09 is Rs.450000/-.(Use the current rate of interest earned by the PPF a/c).
a. Rs.8.95 lakh
b. Rs. 8.89 lakhc. Rs. 8.76 lakh
d. Rs. 8.85 lakhSolution: B
Date
Outstanding
Balance
Contribution
duringtheyear Interest
closingbalance
endofyear Calculationofinterest
1Jul
09 450000 18000 36760 504760
((450000)+(6000*9/12)+(6000*6/12)+(6000*4/
12))*0.08
1Apr10 504760 24000 41621 570381
((504760+6000)+(6000*9/12)+(6000*6/12)+(6
000*4/12))*0.08
1Apr11 570381 24000 46870 641251
((570381+6000)+(6000*9/12)+(6000*6/12)+(6
000*4/12))*0.08
1Apr12 641251 24000 52540 717791
((641251+6000)+(6000*9/12)+(6000*6/12)+(6
000*4/12))*0.08
1Apr13 717791 24000 58663 800455
((717791+6000)+(6000*9/12)+(6000*6/12)+(6
000*4/12))*0.08
1
Apr
14 800455 24000 65276 889731
((800455+6000)+(6000*9/12)+(6000*6/12)+(6
000*4/12))*0.081Apr15 889731
101. Anuradha aged 31 years is working with a real estate company in Lavasa. The
company is covered under the provisions of Payment of Gratuity Act, 1972 she is
drawing a basic salary of Rs. 30000p.m., DA Rs.15000 p.m., HRA 15000 p.m. Transport
allowance Rs. 2000 p.m. she had joined this company on 01-08-2002. Anuradha wants toknow that in case she resigns from her job on 31
stMarch 2009, what gratuity she will
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C) 1359
D) 1529E) 1538
Mode = begin; PV = 220000-50000= 170000, n=30 x12, i%= 7.5/12, so pmt = 1181
104. Avinash pays his mortgage of Rs. 12 Lakh for 15 years at an interest rate of 7%.
Avinash makes the payments on a monthly basis. What is the total amount of interest
Avinash will pay over the term of the mortgage? (Select closest answer)A) Rs 647000
B) Rs 741470
C) Rs 776300D) Rs 730210
E) Rs 697000
Solution: BFirst find monthly pmt with mode = end, n= 15 x 12; i% = 7/12=.58333333; PV = 1200000, pmt
= -10785.93925.Now in AMRT; set = end, PM1 = 1, PM2 = 180;n = 180;i% = 0.58333333;PV=1200000, PMT =
-10785.93925;INT = SOLVE = 741469.065
In excel use cumipmt function to get total interest paid.
105. The cash purchase price of an item is Rs. 2, 00,000. The selling company however
offers installment plan, which allows an immediate payment of Rs. 10,000 and a series of
5 half-yearly payments thereafter. The first installment is payable after one and a halfyear. If the company wants rate of interest of 10% P.A. compounded half-yearly, what
will be the half-yearly installment?A) Rs 50802
B) Rs 45678
C) Rs 29412D) Rs 48383
E) Rs 43885
Solution: A
First find the FV of the cost price after 1.5 years i.e n=3 half years; i% = 10/2, PV= -190000; FV= 219948.75.
Now calculate the pmt with PV = -219948.75, n =5; i% = 10/2; pmt = 50802.61813
106. A client has the need to provide for his child's college education costs. He
envisages that four annual payments of Rs 20,000/- , in current money terms, would beneeded beginning 15 years from now. Assuming level of inflation rate at 5% per annum
and that the fund earns 8% per annum returns throughout; calculate the present value to
be placed on this liability when carrying out a needs analysis for this client. (Round ofyour answer to the nearest '000')
A) 23000
B) 50000
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C) 24000
D) 34000E) 49000
Solution: B
0 0
1 02 0
3 0
4 0
5 0
6 0
7 0
8 0
9 0
10 0 RR [1.08/1.05]1x100 2.85714
11 0
12 0
13 0
14 0
15 20000
16 20000
17 20000
18 20000
NPV 50,285.96
107. The debt mutual fund of your client has generated returns of 11% p.a. in 3 years.
He wants to know the actual return of his portfolio, after tax and inflation, if his income
tax slab is 30%.and inflation is 6%p.a.a. 1.70% p.a.
b. 4.70% p.a.
c. 3.50% p.a.
d. 1.60% p.a.Solution: D
Return after tax = 11 x (1- 0.30) = 7.7%,
Return after inflation = [1.077/1.06]-1 x100 = 1.60377