For an investment product guaranteeing a fixed cash flow of Rs.

4 lakh per annum for 20 ye

Year

Rate
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Amount payable
8.25%
8.25%
8.25%
8.25%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%

400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00
400000.00

Present value on 4th Year

400000.00
372093.02
346133.04
321984.23
299520.21
278623.45
259184.61
241101.96
224280.89
208633.39
194077.57
180537.28
167941.65
156224.79
145325.39
135186.41
125754.80
116981.21
108819.73
101227.65

lakh per annum for 20 years beginning four years from the date of investment, what price should be fixed if the
and 7.5% p.a. for the remaining period of the product?

Value of corpus at fourth year

400000.00
372093.02
346133.04
321984.23
299520.21
278623.45
259184.61
241101.96
224280.89
208633.39
194077.57
180537.28
167941.65
156224.79
145325.39
135186.41
125754.80
116981.21
108819.73
101227.65

4383631.28

investment, what price should be fixed if the same can be invested in financial instruments which can yield 8.2
maining period of the product?

Net capital required as on date

3192437.46

$4,383,631.28
3192437.45565

ments which can yield 8.25 % p.a. for the four years

The average inflation over the last three years is 8.5 % p.a. You invested Rs. 1 lakh in a se
obtained from
FV
Year
Inflation
Investment
Rate
Actual rate earned

130000
3
8.50%
100000
9%
0.64%

ou invested Rs. 1 lakh in a security 3 years ago which you have redeemed for Rs. 1.3 lakh. What real return hav
obtained from investment?

kh. What real return have you

Q3Mr. As portfolio consists of two stocks A and B in which he has invested Rs. 75,000 and Rs. 67,000, respecti
current scenario is 12% while the return on Treasury bonds is 7%

A
Rf
Beta
Rm
Rate

Effective rate

B
7%
1.4
12%
14%
75000.00
85500

7%
0.8
12%
11%
67000.00
74370

142000.00
159870.00
13%

,000 and Rs. 67,000, respectively. Stock A has beta of 1.4 and stock B has beta of 0.80. The return expected from the market in
eturn on Treasury bonds is 7%. What is the expected return from the portfolio?

pected from the market in

Q4A 15-year, 9% corporate bond with Face Value Rs. 1,000 and interest payable semi-annu
maturity of 7%. If the record date for the last coupon has just passed, at what value 50 b

Tenure
Rate
Maturity
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
9.5
10
10.5
11
11.5
12
12.5
13
13.5
14
14.5
15
15

15
9%
1,000
6
7%
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
45
1000

45.00
43.50
42.06
40.66
39.30
38.00
36.73
35.51
34.33
33.19
32.08
31.02
29.99
666.34

$1,148

rest payable semi-annually matures after 6 years. The bond is available at a yield to
sed, at what value 50 bonds of the corporate are likely to be quoted in the market?

Your manage a Rs. 10,00,000 portfolio. You are expecting to receive an additional Rs. 6,50
percent. The risk-free rate is 5 percent and the return on the market is 9.5 percent. If you
the average beta for the new stocks
Capital
Required
Rf
Rm
beta

10000000
10.25%
5%
9.50%
1.17

650000 10650000
22.29%
11.00%
5%
5%
9.50%
9.50%
3.84
1.33 1.330001

0.00

n additional Rs. 6,50,000 from a new client. The existing portfolio has a required return of 10.25
9.5 percent. If you want required return on the new portfolio to be 11 percent, what should be
for the new stocks added to the portfolio?

Mr. A purchased a flat worth Rs. 50 lakh in January 2007 by availing a housing loan of Rs
January 2013 has appreciated to Rs. 90 lakh. What approximate value of home equity ca
aside 15% of the appreciation value towards taxes and ot
Value
Loan
Rate
Tenure
Value
Increased in worth
Tax
Post tax worth
New equity
Equity %
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22

5000000
3500000
9%
15
9000000
4000000
15%
3400000
4900000
58%
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2
398354.2

Jan-07

Jan-13

3585188

vailing a housing loan of Rs. 35 lakh for tenure 15 years at the rate of 9% p.a. The value of his flat as in
ate value of home equity can he consider in his flat towards his unencumbered interest after also setting
value towards taxes and other costs to be discharged on selling the unit?

e of his flat as in
after also setting

Q7A stock of face value Rs. 10 is currently piced at Rs. 175. The company paid a dividend of 125% in the previo
beta of 0.8 . You expect the market to give a return of 12% while the risk-free rate is 5%. You find out the
FV
MP
Dividend
Growth
beta
Rm
Rf
Rr
D1
D2
Estimated market price
Underpriced

10
125
125%
5%
0.8
12%
5%
11%
12.5
13.125
234.4 =d1/(r-g)
109.375

dend of 125% in the previous fiscal year and the absolute amount of dividend is expected to grow by on an average 5 % year-on-year. It has
rate is 5%. You find out the extent of undervaluation or overvaluation of the stock by dividend discount method, and state that ______.

on an average 5 % year-on-year. It has a

nt method, and state that ______.

Q8Businessman wants to achieve the goal of marriage of his daughter after 10 years. The funds required wo
allocation strategy where he should invest monthly in equity and debt in ratio 65:35 for 9 years, and shift the en
equity, debt and liquid funds in this period are 12 % p.a., 9 % p.a. and 5 % p.a., respectively, what a

D
E
L
Per month

65%
35%
7944
1547619
10

12%
9%
5%
4998
833333
2380952.381
2500000

years. The funds required would be Rs. 25 lakh at then costs. He wants to invest monthly for the goal. You suggest an asset
5 for 9 years, and shift the entire accumulated amount in these funds to liquid fund in the last year. If the returns expected from
5 % p.a., respectively, what approximate amount per month is required to be allocated to equity and debt schemes

You suggest an asset

he returns expected from
ebt schemes

Q9 Your client started investing Rs. 12,000 per month a year ago in an asset allocation of 30:70 in equity and de
15 lakh for the same goal. You expect equity and debt to give returns of 11.75% p.a. and 8.25% p.a., respectivel
Rs. 2,000 additional per month to see how clos

d
e
d
e

FV 6 years from now

Short by

30%
70%
12000
3600
8400
336230
880928
1217158
282842

8.25%
11.75%

on of 30:70 in equity and debt to achieve a goal in 6 years from now by accumulating Rs. 10 lakh. You realize that he would be requiring Rs
and 8.25% p.a., respectively in the entire period of investment. You assess changing asset allocation to 65:35 in equity and debt by investin
l per month to see how closer he can reach to his goal. You find that ______.

35%
65%
14000
4900
9100
457647
954339
1411986
88014

8.25%
11.75%

u realize that he would be requiring Rs.

o 65:35 in equity and debt by investing

Q10 Your client starts investing immediately for 10 years annually Rs. 60,000 in the ratio of 80:20 in equity and
protect the wealth, he rebalances the portfolio in 40:60 ratio of equity and debt after 10 years and invests in the sa
9% p.a. and 7% p.a., respectively. What rate of return is expected on his total investments? How would this return

e
d
time
e
d

Net worth after 10 years

Initial new portfolio
d
e
d previous
e previous
New investment
d
e

Total investment
Inflation

Interest rebating inflation

Rate of return

60000
80%
20%
10
48000
12000
930010
190429
1120439

60%
40%
672263
448176
60000
36000
24000
5
1164403
846134
2010536
900000
6%
1480352
530185
2.39%

11.75%
8.25%

7%
9%

o of 80:20 in equity and debt products. You expects return from equity and debt to be 11.75% p.a. and 8.25% p.a. during this period. To
ears and invests in the same ratio annually Rs. 60,000 for the next 5 years. The return expected from equity and debt in this period subsides
s? How would this return fare when seen from average inflation of 6% during the entire period?

8.25% p.a. during this period. To

quity and debt in this period subsides to

Q2
Q3
Q1

Particulars
Amount requiered for education
Amount required for retirement
Net worth of family
Salary-expense
PPF
Flat
Equity
Bank balance
Car
Net worth

Q4

Saving to be invested in ratio of

Equity %
Debt %

31-Mar-12
Sanjay
31
Salary
Expense
Equity mutual funds
2-Feb-04
Units
Value
18-Jan-07
Investement
Price
Units
31-Mar-12
NAV
Days
31-Mar-12
NAV's
Car
Bank balance
House
PPF
Annual expense after retirement
House purchase
House purchase

Debt
Equity
Rate
Home loan
PMT home loan
Depriciation on Car
Additional revenue on income post retirement

Anika

Sanjay

1
2
3
4
5
6
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

Year
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62

Corpus Required in 2042

32
63
33
64

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042

2043
2044

34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80

2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060

4148470
51902887

12516741
177400
2566301
309665
216241
200000
15986348

22%
78%

sheryena

Ajinka
28

1500000
600000
395582.83

3000 units
12.68 /unit
50000
33.68 /unit
1484 units
69.06 /unit

309665.04
200000
216241
2566301
177400
80%
29-Sep-13
6000000
6733504

31-Mar-12

547

20%
80%
9.75%
5386803
530371
10.00%
2%

Salary

Expense

1500000
1582500
1669538
1761362
1858237
1960440
2068264
2182019
2302030
2428641
2562217
2703139
2851811
3008661
3174137
3348715
3532894
3727203
3932199
4148470
4376636
4617351
4871306
5139227
5421885
5720089
6034693
6366602
6716765
7086187
7475927

Education

600000
633000
667815
704545
743295
784176
827306
872807
920812
971457
1024887
1081255
1140724
1203464
1269655
1339486
1413158
1490881
1572880
1659388
1750654
1846940
1948522
2055691
2168754
2288035
2413877
2546641
2686706
2834475
2990371

2523873
2662686

445210
469697
495530
522784
551537
581872
613875
647638
683258
720837
760483
802310
846437
892991
942105
993921
1048587
4148470

51902887
2438525
2485646

2809134
2963636
3126636
3298601
3480024
3671425
3873354
4086388
4311140
4548252
4798406
5062318
5340746
5634487
5944384
6271325

2533678
2582638
2632544
2683414
2735267
2788123
2842000
2896917
2952897
3009957
3068121
3127408
3187841
3249442
3312233
3376238

Retirement

Life expectancy
62

Equity
Gbond/Security
Liquid scheme

Car
Bank balance
Premium paid
Sum assured

80
15%
9%
7.50%

200000
50000
10000
5000000

Inflation
Rf
Real state appriciation

PPF
Annual investment
Investment
Interest
Rate

Home equity

Home loan

New car

Insurance premium

400000
1346701

530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371
530371

10650
11342
12079
12865
13701
14591
15540
16550
17626
18771
19992
21291
22675
24149
25718
27390
29170
31067
33086
35236
37527
39966
42564
45331
48277
51415
54757
58316
62107
66144
70443

5.50%
6.50%
8%
8-Jul-08
177400
30000
120000
57400
21%

1362

Equity
Debt

FD
Maturity date
Rate
Maturity

22%
78%

1-Aug-10
150000
31-Jul-12
7.25%
150000

608

Salary-Expense

870000
919500
971723
1026817
1084942
1146264
1210959
1279211
1351218
1427185
1507330
1591883
1681087
1775197
1874482
1979229
2119736
2236322
2359320
2489082
2625982
2770411
2922783
3083536
3253131
3432053
3620816
3819961
4030059
4251712
4485556

Expense other

440650
41342
1017660
1042932
1069601
1097746
1127448
1158792
1191871
1226780
1263620
1302498
1343528
1386829
1432526
1480751
1501646
1555358
1612043
4714077
567897
570337
572934
575701
578648
581786
585127
588687
62107
66144
70443

PPF expense

30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000
30000

PPF

177400
213285.3080569
250361.123964
288666.9432424
328243.5716912
369133.1688563
411379.2929416
455026.9472098
500122.6279229
546714.373873
594851.817556
644586.2380436
695970.615609
749059.6881648
803910.0095731
860580.0098907
919130.0576122

Home

1-Dec-11
2500000

121

Cash requirement

1346701
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
51902887

Cash Deficiet

45938
16114
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2224995
0
0
0
0
0
0
0
0
0
0
0

Present Cash

429350
878158
-45938
-16114
15341
48518
83511
120419
159347
200405
243710
289385
337558
388368
441957
498478
618090
680964
747277
-2224995
2058084
2200074
2349849
2507835
2674483
2850268
3035689
3231274
3967952
4185568
4415113

Equity

Debt

309665
439559.260
687782.793
738801.502
801499.994
877317.850
967845.491
1074838.921
1200235.860
1346173.391
1515007.277
1709333.080
1932009.272
2186182.493
2475315.192
2803215.827
3174071.897
3825118.517
4331351.383
4898924.505
4811421.102
5733659.337
6772678.208
7940843.161
9251734.475
10720262.203
12362791.766
14197281.180
16243430.978
18648859.241
21322593.720

342132.452
1048388.409
1031657.242
1038373.710
1070283.127
1129235.030
1217189.043
1336221.061
1488529.775
1676443.561
1902427.739
2169092.245
2479199.707
2835673.987
3241609.170
3700279.067
4995378.197
5632711.264
6334968.535
4682049.956
6410817.267
8285503.574
10315078.715
12509022.508
14877353.030
17430656.457
20180118.541
23137557.810
26738092.409
30580293.619

51902887