SVKM’s NMIMS
School of Business Management
Programme: MBA Batch: 2022 - 2024
Academic Year: 2023 – 2024 Subject: Wealth Management
Date: 07 December 2023 Time: 11:00 to 13:00 Duration: - 2 Hrs
N.B.:-
1. There are four questions in this paper. All questions are compulsory.
2. Each question carries10 marks.
3. For answering the questions use of this excel book is only allowed.
4. Access to Internet / intranet is prohibited.
5. Each question has been provided in the designated excel sheet for that question.
6. Answer each question in the designated excel sheet for that question.
7. While answering the question don’t leave unnecessary space.
8. Cover your answer area by thick box border in the same way as questions are covered
9. While answering do not change question data.
Semester: V
Marks: 40
Duration: - 2 Hrs
et for that question.
y as questions are covered
Q1: Mr Rohvir an employee at JCL ltd approached you for his retirement planning. His annual expenses
today are Rs. 10 lakh out of which Rs. 2 lakh are health related expenses and rest of Rs. 8 lakh are
general expenses. However he is committed to change his living standard and thereby reduce the general
expenses to 75% of current general expenses but health expenses are expected to increase by 50%. He is
currently 32 years old and is expected to retire at 65. He life expectancy si 80 years. Expected overall
inflation rate is 5%. The return on retirement corpus is expected to be 7%. You are required to:
a. Solve the case to arrive at inflation adjusted annual expenses of client at the time of retirement. 2 Marks
b.
c. Appraise Rohvir investing
He is currently about the retirement
Rs. 12000 corpus required
pm in large captoequity
finance the expenses
oriented of non-earning
funds which life. to 3 Marks
are expected
generate a return of 12% annually. Ralate and find out if this investment enough to finance his retirement
corpus. 3 Marks
d. Judge the rate of retrun that Rohvir needs so as to finance his retirement corpus adequately,
considering that he can invest only Rs. 12000 pm? 2 Marks
SOLUTION
1) General Expenses ₹ 800,000.00
2) Health Related Expenses ₹ 200,000.00
Total Current expenses ₹ 1,000,000.00
1) General Expenses post retirement ₹ 600,000.00
2) Health Related Expenses post retirement ₹ 100,000.00
Total Current expenses post retirement ₹ 700,000.00
Inflation Rate 5%
Current age 32
Retirement age 65
Years to retire 33
a. Inflation adjusted annual expenses of client at the time of retirement. ₹ 3,502,231.98
Life Expectancy 80
Years after retirement 15
Return on retirement corpus 7%
Inflation Adjusted rate 1.904761904761900%
b. Retirement corpus required to finance the expenses of non-earning life. ₹ 46,186,701.48
His current investment towards the retirement corpus monthly 12000
No. of years of investment 33
Nper 396
Rate of return annually 12%
c. Total amount at the time of retirement ₹ 60,522,749.51
Amount in excees that he is saving towards retirement corpus ₹ 14,336,048.03
So his investment of 12000 pm with a return of 12% pa is sufficient to finance his retirement
d. The rate of retrun that Rohvir needs so as to finance his retirement corpus adequately 0.91%
0.109070067610758
Assuming Investment is done at the end of the month
Monthly rate
Yearly rate
Q2: Chandan, aged 35 years, is working as a faculty mamber in a management institute with an annual sala
present. Value of his present investments (in his name) is Rs.5,50,000/- and balance at bank is Rs.50,000/-
Chandan would like to have an emergency fund of Rs.5,00,000/- and also to create education fund for his t
of 18. Education inflation in India on an average is assumed to be 5.5%.
He has an outstanding loan of Rs.10,00,000/- on his house property, currently valued at Rs.80,00,000/-. Be
Chandan wishes to provide the present income to the family for 1 year in case of his untimely death. Then
Chandan wants to know whether he is adequately insured, and, in case if not, what is the additional amoun
Q2: Chandan, aged 35 years, is working as a faculty mamber in a management institute with an annual salary of Rs. 14,00,000/-
present. Value of his present investments (in his name) is Rs.5,50,000/- and balance at bank is Rs.50,000/-
Chandan would like to have an emergency fund of Rs.5,00,000/- and also to create education fund for his two children. In prese
of 18. Education inflation in India on an average is assumed to be 5.5%.
He has an outstanding loan of Rs.10,00,000/- on his house property, currently valued at Rs.80,00,000/-. Being a mortgage loan,
Chandan wishes to provide the present income to the family for 1 year in case of his untimely death. Then onwards, 75% of his
Chandan wants to know whether he is adequately insured, and, in case if not, what is the additional amount of life insurance req
SOLUTION
Particulars
Current age
Retirement age
Spouse's current age
Spouse's life expectancy
Year's to retirement for chandan
Age of Elder child
Age of younger child
Assets
life insurance cover
Investment
Bank balance
As insurance is taken against house loan so it will be not added to the Total Insurance required
nnual salary of Rs. 14,00,000/-. He is married and has two children aged 8 years and 4 years and is expected to retire at the of ag
.50,000/-
d for his two children. In present times, the college expenses for the kind of education he wants for elder child are Rs.10,00,000/
000/-. Being a mortgage loan, the bank had insisted for a loan protection insurance at the time of disbursement of loan to which
ath. Then onwards, 75% of his present income till elder child attains age of 18 and 50% of present income for the remaining surv
al amount of life insurance required. Assume the rate of return at 8% and average inflation over the next 35 years to be 4%. Dem
Years Rate of return 8%
35 Inflation 4%
65 Inflation Adjusted rate 3.8461538461538500%
30
70
30
8
4
Needs
10000000 emergengy fund 500000
550000 Current college expense for elder child 1000000
50000 Current college expense for younger child 1200000
Family expense for 1 year 1400000
Family expense till elder child attains 18 years 1050000
Family expenses for remaining period till life expectancy of wife 700000
cted to retire at the of age of 65 years. His wife is aged 30 years and has a life expectancy up to age 70. He has a life insurance f
child are Rs.10,00,000/- and younger child are Rs.12,00,000/- in todays terms. He will be required to spend on higher education
ement of loan to which Candan agreed.
e for the remaining surviving period of his spouse.
35 years to be 4%. Demonstrate the use of need based approach and appraise Chandan about the requirement of additional life i
Time Actual amount required
30 $161,160.10 161160.0964726
10 $1,708,144.46 1708144.4583536
14 $2,539,309.75 2539309.7542043
40 $29,446,371.60 29446371.60074
40 $22,084,778.70 $22,084,778.70
40 $14,723,185.80 $14,723,185.80
Total insurance required 70662950.410695
Net insurance required 60062950.410695
age 70. He has a life insurance for Rs 1 Crore at
ed to spend on higher education when the child turns
e requirement of additional life insurance.
10 Marks
Q3: Mr. X is a citizen of USA and a person of African origin. Appraise him about his residential status
with the help of the following data of his stay in India for the Assessment Year 2023-24.
F.Y.
2022-23
2021-22
2020-21
2019-20
2018-19
Also assess which of the following incomes will be taxable in his hands:-
Partiulars of Income
Income from house property from Mumbai house
Amount of gift received in Delhi from Indian friend above exemption limit
Income from Denmark Business received in Denmark.Business is controlled from india
Income from sale of agricultural land in Japan
Income earned in Paris in previous yr 2011-12. Remitted in India Now
Investigate about the sensitivity of above income items w.r.t. different residential status one accessee ca
asssume.
SOLUTION
F.Y.
2022-23
2021-22
2020-21
2019-20
2018-19
So Mr. X is a resident but not an ordinary resident of India in the AY 2023-24
Partiulars of Income
Income from house property from Mumbai house
Amount of gift received in Delhi from Indian friend above exemption limit
Income from Denmark Business received in Denmark.Business is controlled from india
Income from sale of agricultural land in Japan
Income earned in Paris in previous yr 2011-12. Remitted in India Now
out his residential status
2023-24.
Days
71
208
11
70
110
Amount INR
5000000
75000
25000000
30000000
50000
al status one accessee can
10 Marks
Resident
Days Clause 1 (stay for 182+ days in relevant PY)
71 No
208 YES
11 No
70 No
110 No
Status RNOR
Amount INR Code
5000000 A2
75000 A1
25000000 B1
30000000 O
50000 O
TOTAL TAXABLE AMO
Resident
Clause 2 (stay for 60+days in relevant PY + stay for 365+ days in 4 PY'S preceeding to the relevant PY
yes
NO
NO
NO
NO
Mr. X (RNOR)
Taxable
Taxable
Taxable
Not Taxable
Not Taxable
TOTAL TAXABLE AMOUNT
Ordinary resident
Clause 1 (Resident for 2 years out of 10 PY's preceedind relevant PY)
NO
NO
NO
NO
NO
Taxable Amount
5000000
75000
25000000
0
0
30075000
Ordinary resident
Clause 2 (stay for 730+ days for 7 PY's preceeding to relavant PY)
NO
NO
NO
NO
NO
Q4: Mr. XMan, aged 25, is a manager earning Rs 12,00,000 annually. He is planning to marry Yeti and they plan
11,00,000 in student loans, borrowed at 10% for 8 years, 12 months back, whose repayment starts after 12 months
month. They plan to purchase a home for Rs 1,00,00,000 next year, partly financed by his parents by Rs 50,00,000
on the house and cars totals Rs 20,000 annually. Health and life insurance, cost them Rs 25,000 annually. Mr. XM
and has another Rs 4,00,000 in a equity index mutual fund (12% annual return expected). Mrs. XMan has Gold w
return. She drives a three-year-old Car for which she paid Rs 3,00,000, worth 2,50,000 now and would be worth R
monthly payment for the Car Loan is Rs 10,000. Mr. X drives a six-year-old Car worth Rs 3,00,000 now (Rs, 2,50
of 50,000 for the current year. Income tax at 15% overall for Mr Xman, and nothing for Yeti.
(a) Appriase Mr & Mrs.. Xman about their total assets and liabilities & net worth this year? Next year?
(b) Ascertain the monthly payout on their mortgage?
(c) Examine if Mr Xman take mortgage loan provided the bank only funds upto EMI of 35% of take home salary
would he get the loan?
techt and owes Rs
,00,000 annually from next
for 20 years. The insurance
count (3.5% annual interest)
d is giving 10% annual
0,000 on her car loan. The
Consider monthly expenses
3+3 Marks
2 Marks
2 Marks
SOLUTION
a)
Current year Net worth of both
Particulars Assets Liabilities Net Worth
Student loan of Yeti 1100000 -1100000
Savings Account of Mr Xman 300000 300000
Savings account of Yeti 700000 700000
Equity Index Mutual fund 400000 400000
Gold 1200000 1200000
Yeti's car 250000 250000
Yeti's car loan 100000 -100000
X's car 300000 300000
Net Worth 1950000
Workings
Income after tax of XMan 1020000
Less : Yearly expenses 600000
Less : Insurance expenses combined 45000
Savings of Mr X 375000
Income of Yeti 700000
Less : Car loan (paid for 10 months) 100000
Savings of Yeti 600000
Current year Net worth of both
Particulars Assets Liabilities Net Worth
Student loan of Yeti 1100000 -1100000
House loan 5000000 -5000000
Savings Account of Mr Xman 685500 685500
Savings account of Yeti 1324500 1324500
Equity Index Mutual fund 448000 448000
Gold 1320000 1320000
Yeti's car 225000 225000
Yeti's car loan 0 0
X's car 250000 250000
Net Worth -1847000
b)
rate 8.50%
time 20
nper 240
Property value 10000000
Amount from parents 5000000
Amount of loan taken 5000000
Payout per month $43,391.16
Paid off
