Results

Total Marks : 150

Marks Scored :5

Percentage : 3.33%

Required Marks : 75

Remarks : Fail

Correct Answer Your Answer Match

Q 1. Which of the following statements is correct about peril?

1 peril is the condition which increases the risk or seriousness of a loss

2 peril is something that can cause a loss
3 A peril is habit or activity that increases risk, such as drug or alcohol use
4 A peril increases the probability and/or the severity of a loss

Q 2. Hazard is _____________.

1 the direct cause of the loss

2 the average size of a loss per occurrence
3 the condition that increases the cause of a loss
4 the number of losses during a specified period

Q 3. Mr. Manmohan wants to discontinue all the three endowment policies and
instead invest in a combination of a Mutual Fund Scheme and a Term Insurance
Plan for the same sum assured. The surrender value of the old endowment
policies will be 55% of the premiums paid. A total of 5 premiums have been paid
as of now. The surrender value and future premiums he would have paid can be
deployed in a Mutual Fund scheme giving an annual return of 14%. What
maturity value he is expected to get from his endowment plans, if he were to
continue it till the end? Also indicate the maturity value in case he surrenders
the policy and starts redirecting the premium and the surrender value from this
point onwards in a combination of MF and Term insurance plan. Additional Info:
1.Endowment plans (3 policies) S.A. Rs. 1.50 Lakh each for which he is paying a
sum total of Rs. 18,650 p.a., as premium (20 years term). The endowment
insurance policies can be assumed to give a bonus of Rs. 60 per thousand sum
assured. 2. a fresh term insurance with a tabular premium shall be Rs. 3.50 per
thousand sum assured, for his age.
1 Rs. 9,90,000; Rs. 12,19,502
2 Rs. 9,90,000; Rs. 11,14,696
3 Rs. 9,55,000; Rs. 11,83,748
4 Rs. 9,55,000; Rs. 12,19,502
Explanation:
Solution: Step 1:Surrender Value = (Rs. 18650*5 years)*55% = Rs. 51,287. Step
2: FV of regular premium along with surrender value from endowment plan to MF scheme
growing @ 14% p.a Annual premium for term plan = (450000 /1000) * 3.50 = Rs. 1575
 per annum. Amount available for mutual fund investment after paying term plan
premium= Rs. 18650 (current endowment plan premium) - Rs.1575 (new term plan
premium) = Rs.17,075 per annum BGN, N= 15 (20-5), I= 14, PV= - 51287, PMT= -
17075, FV= solve (12,19,497), P/y= 1 , C/y= 1 Step 3: Maturity proceeds from existing
endowment plan, if continued till its maturity date. Total Bonus:{ (450000 /1000) * 60 }*
20 = Rs. 540,000 + Sum Assured (Rs.450000) = Rs. 990,000

Q 4. Physical hazards in case of non-life insurance are _________.

1 hazards arising from a situation’s structural or operational features

2 hazards caused by the carelessness of the operating entities
3 cunrelated incidents aggravating a situation of peril
4 hazards caused by external environmental factors

Q 5. Morale hazard arises from __________.

1 the insured’s intrinsic character differentiating right from wrong

2 the possibility that having insurance makes us less careful towards a perilous situation
3 the insured’s conscious and malicious intent to cause a loss
4 the insured’s tendency to profit from a situation of peril

Q 6. Once the risk is measured, insurers either charge more for the higher risk or
refuse to cover the higher risk at all in order to protect themselves from______.
1 inadequate reserves
2 unfair profiteering by the insured
3 adverse selection
4 resorting to reinsurance

Q 7. Which of the following cannot be claimed under travel insurance ?

1 Buglary and robbery for indian home while travelling aboard

2 Loss of bagage and financial loss due to delay or cancellation of flight
3 Without limit theft of cash and or jewelry when aboard.
4 Medical expenses due to hospitalization or personal accident when travelling aboard.

Q 8. The purpose of Excess is to _____.

1 provide the insured excess cover over the card rate at a small premium
2 fix a limit up to which claims are settled in a cashless manner
3 fix a quantum which the claim cannot exceed per contingent event
4 restrict coverage to events that are significant enough to incur large costs

Q 9. Clinical Trial Liability Insurance covers legal liability arising out of _______.

1 lack of care, negligence resulting in injury or death of a trial subject

2 claim as a result of a lawful act committed while performing duties
3 death or disability occurring in clinics or hospitals due to negligence
4 third party damages caused due to accidents caused in test runs of automobiles and
airplanes

Q 10. Insurance companies apply the Law of Large Numbers to determine ________.

1 the likely cost of total annual claims

2 the insurance need of a person
 3 the paid up value of a policy
4 the average maturity value of a policy

Q 11. Which of the following cannot be a criterion for identifying an insurable risk?

1 The past statistics of the risk should be available

2 Its chance of occurrence can be deduced from past information
3 It definitely holds out a possibility of loss
4 It holds out prospects of gain as well as loss

Q 12. Which of the following loss can be insured?

1 Loss of profit caused by factory shut down due to strike of workers

2 Loss of a customer's market reputation due to wrong return of cheque by the banker
3 Loss due to reduction in sale of a product as a result of research outcome
4 Loss of brand image caused by wrong report in media

Q 13. Insurance works on the principle of:

1 Sharing of losses
2 Probabilities
3 Large numbers
4 Randomness

Q 14. The concept of indemnity is based on the key principle that policyholders should
be prevented from _____
1 insuring existing losses.
2 making false insurance claims.
3 paying excessively for insurance cover.
4 profiting from insurance

Q 15. The general need for a pension policy results from the existence of what key
problem?
1 Anticipated fall in income.
2 Lack of employment opportunities.
3 Likely deterioration in health.
4 Uncertainty over investment performance

Q 16. For a high severity risk, which of the following would be the best option?

1 Avoid
2 Retain
3 Transfer
4 Reduce

Q 17. ___ requires every vehicle owner to compulsorily purchase third party insurance

1 Insurance Regulatory and Development Authority Act

2 Motor Insurance Act
3 Insurance Act
4 General Insurance Business Act
Q 18. The _____ is one who holds a license to act as an Insurance agent for a life
insurance as well as a general insurance
1 Composite Insurance Agent
2 Bancassurance Act
3 Corporate Agent
4 Designated Person

Q 19. Peril is _____

1 loss that results from dishonesty

2 direct cause of the loss
3 the chance of damage or loss
4 anything that either causes or increases the likelihood of a loss

Q 20. The following is not a factor when identifying the life insurance need of a client ?

1 Existing financial and Other assets

2 Non- earning dependents having definite life goals
3 Uncovered financial liabilities
4 Tax saving potential

Q 21. Refiancing can be defined as____

1 Securitization of an existing loan to raise finances

2 borrowing at lower cost in order to pay off higher cost debt
3 financing a running project by borrowing more against assets
4 recovering outstanding loan by selling off mortgage assets

Q 22. The term of insurance in non-life insurance is typically

1 Decided by the insured

2 Two years
3 One year
4 Flexible

Q 23. Unit Linked Insurance plans are known to have the following features:

1 They have sum assured varying as per the outstanding units market value
2 They have low sum assured to premium ratio, offer insurnce while managing
investments in capital markets
3 They are investment cum insurance plans offering lower of the outstandings units value
or sum assured in contingency
4 They are like any other investment plans with their performances benchmarked to
market indices.

Q 24. In an immediate annuity-

1 Payouts begins immediately after the investment is made.

2 Payouts begins after the accumulation period is over.
3 Payouts begin after 5 years
4 Payouts begin after specific period of time

Q 25. Employers Health Insurance is _____

 1 an agreement between an employer and an insurer whereby the latter reimburses the
medical costs to the employees as retirees welfare scheme
2 an insurance policy taken by an employer to cover up to a collective insured limit the
hospitalization expenses of its confirmed employees
3 an agreement between an employer and an insurer to cover the medical needs of the
employees and their families.
4 an agreement between an employer an the employees to cover the domiciliary medical
expenses of the employees and their families.

Q 26. Which of these asset classes is primarily used to meet regular needs for liquid
cash?
1 Cash and Equivalents
2 Equity
3 Debt
4 Loan

Q 27. Risk is ____

1 the direct cause of the loss

2 the quantum of loss per occurrence
3 anything that causes or increases the likehood of a loss
4 the chance of loss.

Q 28. Which of the following is not the correct reason Insurer requires material
information ?
1 To decide about acceptance
2 To fix the rate of premium
3 To fix the sum insured
4 To fix terms and conditions of cover

Q 29. If there is no insurable interest the insurance contract becomes ________

1 unenforceacle in a Court of Law

2 illegal
3 void
4 voidable

Q 30. Consent of insurers is not required for the assignment of ____________

1 marine hull policies

2 marine cargo policies
3 fire policies
4 burglary policies

Q 31. Sum insured under an insurance policy means

1 it is the agreed value of subject matter insured

2 the amount payable when there is a loss
3 the amount on which the premium is calculated
4 the maximum limit of liability under the policy

Q 32. Insurance contracts are not gambling transactions because

 1 they are based on insurable interest
2 the policy is stamped
3 full premium is paid
4 all material facts are disclosed

Q 33. Transfer of rights and liabilities of an insured to another person who has
insurable interest is known as
1 Consideration
2 Subrogation
3 Assignment
4 Endorsement

Q 34. Avoiding situation as a mode of risk control would impact _____

1 the evaluation of optimum premium for risk transfer

2 the underwriting competence of insurance companies
3 the occurrence of the situation of risk itself
4 loosing out on the potential gain that may arise.

Q 35. Umang proposed to buy another life insurance policy which also offered Critical
Illness Rider for an additional premium. Umang was considering a sum assured
of Rs. 10 Iakh for the death benefit and Rs. 2 Lakh under Critical Illness. Before
finalizing the same Umang 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?
1 A sum of Rs. 2 Lakh shall be paid when such a disease is identified and certified by a
Doctor.
2 Actual Expenses, subject to a maximum of the Rider amount, shall be paid after
treatment of disease.
3 Rider benefit is available only in case of death of the Insured person by the disease.
4 A sum of Rs. 2 lakh shall be paid when disease is identified and another Rs. 2 Lakh shall
be paid at the time of death.

Q 36. In motor insurance Certificates of insurance are issued because

1 Make of vehicle is not known

2 Year of manufacture is not known
3 Seating capacity is not known
4 It is required by the Motor Vehicles Act

Q 37. Which of the following intermediaries do not require IRDA’s licence/ approval to
operate in India?
1 Insurance Brokers
2 Insurance Agents
3 Third Party Administrators
4 All the above intermediaries require IRDA’s licence/ approval

Q 38. As per IRDA Regulations which of the following is not a function of Third Party
Administrators.
1 collection of premium
2 collection of claims documents
3 claims scrutiny and processing
 4 Claims Payment

Q 39. The term 'Fire' under the fire policy means

1 natural heating
2 burning by order of public authority
3 spontaneous combustion
4 accidental ignition

Q 40. Once an absolute assignment is effected under a life insurance policy, who will
be the titleholder(s) of this policy?
1 The assignor in all cases.
2 The assignee in all cases.
3 Either the assignor or assignee depending on the type of policy involved.
4 The assignor and assignee jointly.

Q 41. Which of the following factors does not match with the need of health insurance?

1 Financial protection from rising cost of hospitalization

2 Reduce the financial consequences of adverse situations
3 Access to best medical facilities without liquidating assets
4 Improving longevity and better medical facilities

Q 42. Which of the following is not an effect of rising inflation in a nations economy

1 It weakens the value of the nation's currency in the international markets

2 It increases uncertainty of future costs inputs in the entire economy
3 It reduces the purchasing power of money
4 It decreases the debt servicing burden of forex loan of a nation.

Q 43. Real rate of return necessarily takes into account the following:

1 Compounding
2 Inflation
3 Intrinsic Value
4 Accuracy of investments or payments

Q 44. An actuary is expected to:

1 Make an exact forecast of the future liabilities of policies

2 Make a reasonable forecast of the future liabilities of policies
3 Calculate the premium required to cover a risk on a long-term basis
4 Find the probability of an insured event to happen in non-life policies

Q 45. An endowment plan offers ______

1 regular returns of part of sum assured on surviving specified intervals with full
protection without maturity bonus.
2 insurance cover along with market returns on the premium amount invested.
3 death cover if casualty occurs during policy's term or survival benefits.
4 double protection in case of death or return of premium on survival.

Q 46. Personal accident insurance policy generally does not cover this :
 1 Accidental disability without dimemberment
2 Accidental dismemberment
3 Hospitalization and medical expenses
4 Accidental death benefit.

Q 47. Which of the following statements is incorrect in respect of insurance rider?

1 Riders help in deciding the proposal to seek solutions for hazards specific to one's
situation
2 Rider comes at a additional cost compared to buying a new plan.
3 Riders help to enhance the quality and scope of cover.
4 Premium paid towards riders does not qualify for deduction within specified limits from
the taxable income.

Q 48. On the maturity of an endowment policy, a reduced sum insured is paid out.
What is the most likely reason for this?
1 The instalments were commuted by the policyholder.
2 The policyholder’s health seriously deteriorated during the policy term.
3 The policy was made paid up during the policy term.
4 The policy was subject to a lien.

Q 49. In risk management process the first step is _____

1 identify various loss exposures

2 implementing the extent insurable risk management techniques
3 analysing loss exposure
4 selecting appropriate techniques for treating loss exposure.

Q 50. A Tort is ______

1 necessarily an illegal act causing a harm

2 a wrong done to another person with criminal intent
3 a personal injury caused by a breach of contract
4 a civil wrong unfairly caused by a person's behaviour

Q 51. ______ provides for statutory liability of insured arising out of accidents
occuring due to handling hazardous substances
1 Motor vehicle Act
2 Public Liability Insurance Act
3 Workmen's compensation Act
4 The Employees State Insurance Act

Q 52. In which of the annuities, the rate of payout is based on the return from
underlying assets?
1 Immediate Annuity
2 Fixed Annuity
3 Variable Annuity
4 Implied Annuity

Q 53. Which of the following statements is incorrect about underwriting in insurance ?

1 It is an assurance of paying losses from the insurance company's capital

 2 It involves meassuring risk exposure and determining the premium that needs to be
charged to insure that risk
3 It uses the information about the insured to decide on loading of premium or build
exclusion clauses
4 It lays down objective guidelines to measure the cost of converage commensurate with
long term viability of insurance.

Q 54. The purpose of Excess is to _____.

1 provide the insured excess cover over the card rate at a small premium
2 fix a limit up to which claims are settled in a cashless manner
3 fix a quantum which the claim cannot exceed per contingent event
4 restrict coverage to events that are significant enough to incur large cost

Q 55. A 20 year money back life policy of sum assured Rs. 2.00 Lakh was purchased on
2nd June 1998 at an annual premium of Rs. 23,028. The Policy terms specifies
20% of the sum assured to policyholder surviving the term for Intial five, ten,
fifteen years.The last premium was paid on 11th June 2013. Total bonus in
addition on policy as per the compan's last valuation as on March 2014 was Rs.
107314. The policy holder died on 9th April 2014. The death claim computed is at
least______
1 Rs.374,786
2 Rs.307,314
3 Rs.174,786
4 Rs. 294,786
Explanation:
Death Claim:- Sum Assured = 200,000 (+) Bonus = 107,314 Death Claim = 307,314 In
case of death claim, the entire sum assured along with the accrued bonus is paid to the
life insured, without deducting any previous sum assured payments mde

Q 56. Damage to Rajan’s car in the road accident is of Rs. 22,000. The car later hit
another vehicle parked on the roadside causing damage to it worth Rs. 25,000
and then broke the neighboring wall causing loss worth Rs. 18,000. Rajan has
taken Statutory minimum cover while taking insurance for his car. How much
claim of Rajan would be admissible by the insurance company in this incident?
1 Rs. 22,000
2 Rs. 40,000
3 Rs. 65,000
4 Rs. 43,000

Q 57. As per your assessment Rakesh needs life insurance on the basis of Human Life
Value . How much life insurance does he require? (For calculations assume same
income tax treatment as is prevalent now even for future years; the whole
annual salary is coming at the year end; no existing investments taken into
account, all calculations to be done at the end of the current year and the
discounting factor is 8% p.a Additional Info: 1.Current Net take home annual
salary is Rs. 924,000 Post tax salary to increase at an average rate of 10%
annually 2. personal expenses include petrol expenses for commuting to work
and other miscellaneous expenses Rs. 102,000 p.a . All expenses keep moving up
7% annually 3. Current age - 40 years and employable upto age 55 years.
1 Rs. 129 Lakh
2 Rs. 143 Lakhs
3 Rs. 146 Lakhs
 4 Rs.118 Lakhs
Explanation:
Solution: Step 1: Finding out PV of future income in todays term. END, N= 15, I=
((1.08/1.10)-1)*100, PMT= 924000, PV= Solve (16101952), P/y= 1, C/y = 1 Step 2:
Finding out PV of future personal expenses in todays term. END, N= 15, I= ((1.08/1.07)-
1)*100, PMT= 102,000, PV= Solve (1421419), P/y= 1, C/y = 1 Step 3: PV of income - PV
of Expenses: Rs. 1,61,01,952 - Rs. 14,21,419 = Rs. 1,46,80,533

Q 58. Ramesh wants to invest in an immediate annuity plan at the time of retirement
where Rs. 25,000 per month is paid to him or his wife till either of them is alive.
What lump-sum investment is required to be made by Ramesh for this revenue?
Assume that life expectancies of Ramesh and his wife have not changed and
return on this investment is equal to interest rate on a 5 year Fixed Deposit.
(Take the required rate on annual effective basis and Ignore all expenditures and
taxes) Additional Info: 1.Ramesh, born in the year 1954, life expectancy at birth
65 years 2.His wife , born in the year 1959, life expectancy at birth 70 years, is a
house wife. 3. Today we are in the year 2014. 4.. Present interest rate on 5 years
Fixed Deposit is 8% p.a.
1 Rs. 25.79 Lakhs
2 Rs. 25.62 Lakhs
3 Rs.26.60 Lakhs
4 Rs. 26.77 Lakhs
Explanation:
Solution: BGN, N= 15*12 (70-55, wife is going to live longer),I= 8, PMT= -25000, PV=
Solve (26,77,808), P/y=12 C/y=1

Q 59. As your client Mr. Amarji is a semi-literate person, he doesn’t comprehend a

structured communications in written English or written Hindi. He can read only
Konkani though he understands Hindi in verbal communication. According to you
what would be the most suitable method of recording his consent at all required
instances during construction/implementation of his Financial Plan in this
situation?
1 All documents should be prepared in English only and once its Konkani/Hindi version is
communicated orally to Amaranth, the documents should be got signed by Mr. Amarji.
2 All papers must be prepared in Hindi only as he understands Hindi, and later his
signatures must be taken on all papers.
3 Mr. Amarji must give a blanket authority to you to proceed in his Financial Plan process
4 The documents should be prepared bi-lingual in English and Konkani. A vernacular
declarant should witness the exact validity of translation. Later the bi-lingual documents
may be got signed by Mr. Amarji.

Q 60. A person invested Rs. 50 lakh in a 25-year fixed monthly annuity providing a
yield of 9% p.a. What will be the amount of monthly annuity if the start date is
deferred by 2 years?
1 Rs. 48,085
2 Rs. 48,431
3 Rs. 49,656
4 Rs. 49,301
Explanation:
Solution: Step 1:FV of todays investment after 2 years BGN, N= 2, I= 9, PV= -50,00,000,
FV= solve (59,40,500) P/y=1 , C/y=1 Step 2: Annuity Payments for 25 years. BGN, N=
25*12, I= 9, PV= -59,40,500 PMT= solve (48085), P/y= 12, C/y=1
Q 61. One day, in one of Kamath’s restaurants, one boiler exploded accidently, causing
death of two persons dining there. Now the families of the deceased want a
claim under “The Public Liability Insurance Act 1991”. Kamath wants to know his
liability under the said act for this incident. According to you the same is ______.
1 Rs. 25,000
2 Rs.12,500
3 Rs. 6,000
4 Nil
Explanation:
Solution:As the said Act is applicable for the purpose of providing immediate relief to the
persons affected by accident occuring while handling any hazardous substances and for
matters connected therewith or incidental thereto.

Q 62. An individual of aged 37 expects to earn till age 62 and expect to survive till age
76. His present net earning are Rs. 5 lakhs p.a. Considering his earning are
expected to grow @ 6% p.a and they can be deployed at return of Rs. 8.5% p.a.
What economic value can be considered of the Individual's life?
1 Rs.95.04 Lakh
2 Rs. 167.69 Lakh
3 Rs.55.52 Lakh
4 Rs.129.58 Lakh
Explanation:
Set = Begin; n = 62 - 37 = 25; i% = 2.358490566 (Real rate of return); PV = ? (-
95,83,898.278); PMT = 5,00,000; FV = 0

Q 63. A car is to be insured for Rs. 2,50,000. An insurance company quotes a premium
of Rs. 12,000 with deductible of Rs. 2000 and premium of Rs. 12750 with
Franchise clause ,client that the difference is in the settlement of claim. For
instance, a total expense of Rs. 20,000 towards repairs would result in claim
settlement of Excess under deductible and Franchise clause.
1 Rs.14,000 and Rs. 14,750
2 Rs.18,000 and Rs. 20,000
3 Rs. 18,000 and Rs. 18,750
4 Rs. 18,000 and Rs. 20,750
Explanation:
Under "Excess clause"; any amount of loss exceeding the "excess" is paid, after adjusting
the "excess" i.e. Rs. 20,000 - 2,000 = 18,000. While under "Franchise clause"; any
amount of loss, exceeding the "franchise" is paid in full, without adjusting the "franchise"
i.e. Rs. 20,000 is paid in full

Q 64. Akshay met with an accident on 18th March 2014 and damages incurred on the
car were worth Rs. 50,000. However the insurance company refused to accept
his claim due to pending premium.Akshay wants to know whether any remedy is
available for him. Additional Info: A comprehensive car insurance policy for a
sum of Rs. 2 Lakh, insurance renewal falls on 15th March of every year, car
insurance has to be renewed annually, has a 15 day grace period for renewal,
premium of car insurance policy for this year yet to be paid.
1 Yes, Akshay can win his claim on the ground of”Estoppal”.
2 Yes, Akshay can win his claim on the concept of “Waiver of Rights”.
3 Yes, Akshay can win his claim on the concept ofComprehensive Insurance”.
4 No, Akshay has no relief available because there was no insurance cover for the car at
the time of accident.
 Explanation:
Solution: Since the insurance company allows a 15 days grace period for the renewal.
Akshay can win his case on the ground of Estoppel.

Q 65. Mr.Aatish insured his car for Rs. 5 Lakh well within the validility period of
insurance he transferred the ownership of the car to Mr. Bipin for Rs. 4 Lakh.
Before it could be deliveried it was completely gutted in fire. The insurance claim
was lodged . The claim settlement ideally should be ____
1 Mr. A - Nil , Mr. B - Rs. 4 Lakh
2 Mr. A Rs. 5 Lakh, Mr. B - Nil
3 Mr. A Rs. 1 Lakh, Mr. B - Rs. 4 Lakh
4 Mr. A - Nil , Mr. B - Nil

Q 66. A 40 year old male individual can get a 15-year with-profit life insurance policy
of a company at an annual premium of Rs. 14,000 which gives a sum assured of
Rs. 200,000 lakh. The company historically has declared reversionary bonuses
and terminal bonus per thousand sum assured at Rs. 40 and Rs. 85, respectively.
A term plan with same life and other parameters is generally available for an
annual premium of Rs. 4,565. Find the return on investment component of the
company’s policy on surviving the term.
1 11.46%
2 10.24%
3 14.50%
4 12.06%
Explanation:
Step 1:Premium of with-profit policy Rs.14000 Less:Premium of term policy 4,565 Rs.
Excess premium on investment component Rs. 9435 (Rs. 14000-4565) Step 2: Maturity
calculation: Reversionary bonus: (200,000/1000)*(40*15)= Rs. 120,000 Terminal bonus :
(200,000/1000)* 85= Rs. 17000 Life assured = Rs. 200,000 Total amount receivable =
Rs. 337,000 Step 3:Return on investment component: BGN, N= 15, I = Solve (10.2458),
PMT= -9435, FV= 337000, P/y=1, C/y=1

Q 67. You have ascertained that the surrender value of your client life insurance policy
as given by his insurer is 30% value of all premiums paid till date excluding first
year premium. This policy has a guaranteed addition of Rs. 55 per thousand for
every completed policy year. Client wants to know, if he keeps this policy and
continues to pay the premium regularly till its maturity, what annual returns is
he expected to get from this policy Additional Info: 1.LIC endowment policy# :
Rs. 21,600 (Current surrender value) #4 annual premiums have been paid for
total premium paying term of 25 years for a sum assured of Rs. 5 lakh.
1 5.26%
2 3.18%
3 4.91%
4 Given data is insufficient to get the solution
Explanation:
Solution: Step 1:Total premium paid on which surrender value is calculated: Rs. 21600 /
.30 = Rs. 72,000 Surrender Value / Surrender value factor (premium paid on which
surrender value is calculated, which is excluding 1st year premium) Step 2. Annual
premium would be Rs.72000 / 3 year (excluding 1st year premium) = Rs. 24,000 p.a Step
3. Maturity amount receivable: Bonus: (500000/1000 * 55)*25 : Rs. 687,500 Life assured
: Rs. 500,000 Total : Rs. 11,87,500 Step 4: Calculating return to be earned during the
policy term: BGN, N= 25 ( policy term), I= Solve (4.913%), PMT= -24000 (annual
premium), FV= 11,87,500 P/y=1, C/y=1
Q 68. A retiree has accumulated Rs. 2.00 crore towards his retirement corpus. His
current monthly household expenses are Rs. 95,400 which he needs inflation
adjusted for 30 years. If he considers average inflation to be 5.5% p.a. from now
onwards, what rate of return from a 30 year annuity, payable annually , should
meet his goal?
1 10.00%
2 9.63%
3 8.50%
4 10.75%
Explanation:
Solution: Step 1:BGN, N= 30, I= solve (4.2613), PV= -2,00,00,000, PMT= 1144800, P/y=
1, C/y=1 Rate indicate inflation adjusted rate of return Step 2: Use Inflation adjusted rate
of return formula to determine return to earn from annuity plan. (1.042613 * 1.055) =
10% Or can Use 4.2613=(R-5.5)/1.055

Q 69. A manager had a peak life cover at age 35 of Rs.2.50 Cr, five policies each of Rs.
50 Lakh. He did not continue one policy when 40, having met some his goals &
financial liabilities. He is 45 years now. His financial parameters are Rs. 80 lakh
at current cost towards outstanding goals of his children in 5 years; inflation
linked living expenses for his family, Rs. 41,000 per month, now, for the next 10
years, and half of such expenses for next 35 years for his spouse. His current
financial assets are Rs. 62 lakh. Considering inflation @ 6.5% p.a and investment
return 9% p.a you review his life cover & advise that+++++++++++
1 he requiries cover of Rs. 1.73 Cr today, he should not surrender any police at this stage
2 he requiries cover of Rs. 2.64 Cr today, he should continue all policies and if posssible
increase his cover.
3 he requires cover of Rs. 1.47 cr today, he may surrender on term policy of Rs. 50 Lakh.
4 he requires cover of Rs. 1 Cr today, he may surrender two term policy of total cover Rs.
1 Cr.
Explanation:
Step 1:- PV of Child's goal Part A:- FV of child's goal (required at 50) (cost):- Set = Begin;
n = 5; i% = 6.5 (inflation rate); PV = -80,00,000; FV = ? (1,09,60,693.31) Part B:- PV of
investment to be made to achieve the cost of child's goals:- Set = Begin; n= 5; i% = 9%
(investment rate); PV=? (71,23,698.596); FV = 1,09,60,693.31 Step 2: - PV of family's
expenses (inflation linked):- Set = Begin; n = 5 x 12 = 60; i% = 2.34741784 (real rate of
return); PV = ? (43,95,155.44); PMT = - 41,000; FV = 0; P/Y = 12 Step 3:- PV of
spouse's expenses (3 step process):- Part A:- Cost of Rs. 20,500 after 10 years, using
inflation rate:- Set = Begin; n = 10; i% = 6.5; PV = -20,500; FV = ? (38,481.31804) Part
B:- PV of expenses, using real rate:- Set = Begin; n = 35x12 = 420; i% = 2.34741784;
PV = ? (1,10,77,525.30); PMT = 38,481.31804; FV = 0; P/Y = 12 Part C: - PV of
expenses using investment rate:- Set= Begin; n = 10; i% = 9; PV = ? (46,79,266.4);
PMT = 0; FV = 1,10,77,525.30 Step 4:- Therefore, amount of insurance required:-
(71,23,698.596 + 43,95,155.44 + 46,79,233.40) - 62,00,000 = 99,98,120.436 (Rs. 1 Cr
approx)

Q 70. A person bought a piece of land in March 2002 for Rs. 1 Cr, He got a factory built
on the land at a cost of Rs. 1.2 Cr. The factory became operational on 1st Sept
2005. The land price appreciated at 8% p.a in the period and the construction
cost has escalated at 10% per annum since 2005. At value the factory should be
insured in April 2013 on market value basis, if the depreciation on factory
premises is charged at 6% p.a on straight line method?
1 Rs. 2.30 Cr
2 Rs. 1.34 Cr
3 Rs. 1.67 Cr
 4 Rs. 2.55 Cr
Explanation:
Step 1: - Escalated Market Value of Factory:- Set = Begin; n = 2013 - 2005 = 8; i% =
10; PV = - 1,20,00,000; FV=? (2,57,23,065.72) Step 2: - Value at which factory should
be insured:- SMPL; Set = 365; Dys = 365 x 8 = 2920; i% = - 6; PV = 2,57,23,065.72;
ALL = Solve (SI (Dep) = -1,23,47,071.55; SFV (Value at which factory should be insured)
= 1,33,75,994.17 Note:- Land is a non depreciable & non insurable asset

Q 71. An executives aged 50 has current savings of Rs. 80 Lakh and a Rs.1.20 Cr life
cover on four policies Rs. 20 lakhs on a 20 year money back and Rs. 20 lakh , Rs.
30 Lakh and Rs. 50 lakh on three Term policies. All are due to mature end near
his age of 60. His liabilities are housing loan Rs. 12 lakhs, lumpsum of Rs. 20
Lakh each for his daughter's higher studies in 3 years and marriage in 5 years.
He decide for his wife inflation linked stream of Rs. 25000 per month for 40
years. You review his life cover by taking inflation of 6% p.a , investment returns
8.5% p.a and advise that____
1 he requiries cover of Rs. 40 lakh today, he may surrender two term policies of total
cover Rs. 80 Lakh
2 he requiries cover of Rs. 25 lakh today, he may surrender all term policies of total cover
Rs. 1 Cr
3 he requiries cover of Rs. 1.2 Cr today, also he should continue all policies.
4 he requiries cover of Rs. 50 lakh today, he may surrender two term policies of total
cover Rs. 70 lakh
Explanation:
Step 1: - PV (Housing Loan) = 12,00,000 (Given); Step 2:- PV (Daughter's higher
studies): - Part A: - Cost of higher studies after 3 years: - Set = Begin; n = 3; i% = 6
(inflation rate); PV = 20,00,000; FV = ? (23,82,032) Part B: - Investment to be made
today to achieve the goal of higher studies after 3 years:- Set = Begin; n = 3; i% = 8.5
(investment rate); PV = ? (18,64,912.194); FV = 23,82,032 Step 3: - PV (Daughter's
marriage expenses):- Part A: - Marriage expenses after 5 years: - Set = Begin; n = 5; i%
= 6 (inflation rate); PV = 20,00,000; FV = ? (26,76,451.155) Part B: - Investment to be
made today to achieve the goal of marriage after 5 years:- Set = Begin; n = 5; i% = 8.5
(investment rate); PV = ? (17,79,961.591); FV = 26,76,451.155 Step 4: - PV (wife's
living expenses):- Set = Begin; n = 40 x 12 = 480; i% = 2.358490566 (real rate of
return); PV = ? (78,11,713.885); PMT = - 25,000; FV = 0; P/Y = 12; C/Y = 12 Step 5:-
Current Insurance Requirement:- 12,00,000 + 18,64,912.144 + 17,79,961.591 +
78,11,713.885 = 1,26,56,587.62

Q 72. Mr. Sukesh wants to create a reasonable financial security of Rs. 6 Lakh per
annum (subject to inflation) for his depended family member consisting of wife a
home maker & a son, in case he meets any eventuality due to any unforeseen
event. What should be his life insurance cover to get this amount for family's
financial security till the remaining expected life of his wife? Assume his wife life
expectancy to be 75 years and life insurance policy proceeds ofhis are invested
in risk / tax free instruments by her. (Indicate nearest figure without
considering any existing asset) Additional Info: 1.Wife current age 35, and son
current age 10 2.Inflation @ 6 %p.a. 2. Risk / Tax free rate of return 8 % pa.
1 Rs. 1.70 Cr
2 B) Rs. 1.45 Cr
3 Rs.1.67 Cr
4 Rs. 2.00 Cr
Explanation:
Solution: BGN, N= 75-35, I= ((1.08 / 1.06)-1)*100, PMT= 600,000, PV= Solve
(17059857), P/y =1, C/y=1
Q 73. Mr.A purchased registered flat worth Rs.35 lakh in Oct 2006. A loan of 20 lakh
was avaiiable for 15 yr @ 8.5 % p.a. He also incurred Rs.2 lakh towards
registration and statutory expenses and further Rs.3 lakh in basic furshing of the
flat. The value of the flat in Oct 2012 has appreciated to Rs. 80.00 Lakhs. What
approximate value of Home Equity can he consider in his flat towards his
unencumbered after tax 12% of the appreciation value toward taxes and other
cost to be discharge on selling the unit ?
1 Rs. 55 Lakhs
2 Rs.65 Lakhs
3 Rs. 69 Lakhs
4 Rs. 60 Lakhs
Explanation:
Solution: Step 1: Calculate EMI of the loan amount taken. END, N= 15*12, I= 8.5, PV=
2000000, PMT= Solve (-19694.80), P/y= 12, C/y= 12 Step 2: To calculate outstanding
loan amount till Oct 2012. (Use AMRT Function) PM1= 1, PM2= 6*12 (Oct 2006 to Oct
2012), BAL = Solve (1483113.80) Step 3: Total Cost of flat including all the other incurred
: Rs. 35 Lakh + Rs. 2 Lakh + Rs. 3 Lakhs = Rs. 40 Lakhs Step 4: Taxation on capital
appreciation @ 12% Sale Price - Cost of purchase = Rs. 80 Lakhs - Rs. 40Lakhs = Rs. 40
Lakhs (Capital gain) to taxed @ 12% : Rs. 4.80 Lakhs Step 5: Home Equity calculation:
Current Market Price - Loan Outstanding - Tax payable Rs. 80,00,000 - Rs.14,83,113- Rs.
480,000 = Rs. 60.36 Lakhs

Q 74. Mr.A has gross annual salary of Rs. 9 lakh of which he saves 30% which include
ststutory EPF,PPF and monthly SIP in long term mutual fund scheme another
30% goes towards servicing of housing & car loan & taxes.His financial planner
advise him to keep aside 6 month's household expense in liquid fund.He changd
job and expect an immediate rise of 20% in his gross income . You estimate that
investment would not change dramatically expect his house hold expense would
rise by 5 % due to child education.How many month's will it take to create liquid
reserve?
1 11 months
2 13 months
3 14 months
4 25 months
Explanation:
Solution: Solution: EPF/PPF/Monthly investments = 900,000*30% = 270,000 Loan
Serving = 900,000*30% = 270,000 Balance Household Exps (100-30-30) =
900,000*40% = 360,000 Revised Cash Flow: Salary income = 900000*1.20 = 10,80,000
Investments and loan amount no change Household: 360000*1.05 = 378,000 Amount to
be invested in liquid fund = 378000 – 12 months therefore for 6 months = (378000*6)/12
= 189,000 Balance amount available (1080000-378000-270000-270000)=162000 Rs.
162000 accumulated in 12 months therefore, months required to accumulate Rs 189000 =
(189000*12)/162000 = 14 months.

Q 75. A policyholder having a 20 year endowment policy and paying annual premium of
Rs.26,147 has sum assured of Rs. 10 Lakh. He has paid 15 premium and has Rs.
8,25,000 towards declared bonuses on the policy. He has in the meanwhile
obtained enough life cover and accumulated wealth. He does not wish to
continue in the policy. He has the option to make policy paidup or surrender the
same at a factor of 75% of the paid up value. What return he should earn on the
surrender value to offset the paid up value?
1 2.57% p.a
2 5.92% p.a
3 6.67% p.a
 4 3.95% p.a
Explanation:
Step 1:- Paid Up Value = [(No. of premiums paid / Total no. of premiums payable) x Sum
Assured] + Bonus PUV = [(15/20)x 10,00,000] + 8,25,000 = 15,75,000 Step 2: -
Surrender Value = 15,75,000 x 75% = 11,81,250 Step 3:- Return on Surrender Value to
offset Paid Up Value: - Set = Begin; n = 5 (20-15); i% = ?(5.922384105); PV = -
11,81,250; FV = 15,75,000

Q 76. The market value of Sohil Shah residential property is assessed at Rs. 25 lakh.
He purchased the plot 5 years ago for Rs. 2.5 lakh. He started construction last
year and incurred a sum of Rs. 12.5 lakh. The land prices in that area have
appreciated by 150% over the five year period and the cost of construction over
the previous year has gone up by 35%. You have advised Sahil to insure his
house property. Sohil wants to know for what approximate amount he should
insure his house property.
1 Rs. 15 lakh
2 Rs. 25 lakh
3 Rs. 23 lakh
4 Rs. 17 lakh
Explanation:
Solution: The insurance of house/flat should ideally be taken at the current construction
cost, as the land is not perishable in case of fire or natural calamities. Rs. 1250000 *1.35
= Rs. 1687500

Q 77. An enterpuener got her office premises constructed 4 years ago for a sum of Rs.
50 Lakh. The cost of similar construction has escalated at 10% p.a since . The
depreciation on the premises is considered at 8% p.a on written down value
basis. An insurer agrees to insure the premises under fire insurance on
Reinstatement value basis. The likely sum assured would be ____
1 Rs.52.4 Lakh
2 Rs. 50.2 Lakh
3 Rs. 47.6 Lakh
4 Rs.73.2 Lakh
Explanation:
Reinstatement Value of office premises: - Set = Begin; n = 4; i% = 10; PV = 50,00,000;
FV = ? (73,20,500) Since Re-instatement, no depreciation to be Counted.