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Jagdish aged 32, has a daughter aged 7 years he wants to achieve a goal for his
daughter education after 10 years. The funds required would be Rs. 15 lakhs at then
costs. He wants to invest monthly for the goal. Being his financial planner, you suggest
an asset allocation strategy where he should invest monthly on equity and debt in
ratio 70:30 for 8 years. And shift the entire accumulated amount in these funds after
the aforesaid period in liquid funds. If the returns expected from equity, debt and
liquid funds in these period are 11.25%, 9% and 6 % per annum respectively. What
approximate amount per month required to be allocated to equity and debt?
A.
B.
C.
D.
PMT = -12250
FV = 1538235.469 (solve)
P/Y = 12
C/Y = 1
Total Accumulation: Rs. 1538235.469 + 909638.2675
= Rs. 2447873.736
Surplus = 2447873.736 - 1500000
= Rs. 947873.7365
3) An individual has recently purchased a house worth Rs. 45 lakh for self-occupation by
availing housing loan of Rs. 30 lakhs at 9.75 % per annum/monthly rate of interest.
The tenure of the loan is 18 years. He has 15 lakhs financial assets at present. He is
expected to save annually Rs. 2 lakhs which he invests on a quarterly basis beginning a
quarter from now in an instrument which is expected to provide a return of 9.5 per
annum. What would be his net worth 5 years from now? The value of the house which
is for consumption purposes is not considered in the net worth so arrived.
A.
B.
C.
D.
Rs. 566982
Rs. 1007913
Rs. 3612535
None of the above
Ans. B
Solution:
EMI on Housing Loan:
Set: End
N = 216
I =9.75
PV = 3000000
PMT = -29514(solve)
P/Y = 12
C/Y = 12
Outstanding Balance after 5 years:
Press AMRT
Solve for BAL = 2604622.623
I = 11.50
PMT = -56250
FV = 1468334(solve)
P/Y = 1
C/Y = 1
Accumulation in debt for 12 year
Set: Begin
N = 12
I =8.50
PMT = -18750
FV = 397705(solve)
P/Y = 1
C/Y = 1
Total Accumulation: Rs. 1866039
As per new asset allocation ratio and new amount: Rs. 75000 will be invested in
(40:60) =Rs. 30000 and Rs. 45000 respectively
Accumulated Amount in new ratio: Rs. 746416 and Rs. 1119623 respectively.
For next 5 years:
Equity Accumulation
Set: Begin
N=5
I =9.5
PV = -746416
PMT = -30000
FV = 1373603(solve)
P/Y = 1
C/Y = 1
Debt Accumulation
Set: Begin
N=5
I =8
PV = -1119623
PMT = -45000
FV = 1930210(solve)
P/Y = 1
C/Y = 1
Total Accumulation: Rs. 3303813
Rate of interest on his investment
Set: Begin
N = 17
I = 9.88 (solve)
PMT = -75000
FV = 3303813
P/Y = 1
C/Y = 1
RRR = 9.88 - 6/1.06
= 3.66%
5) For an investment product guaranteeing a fixed cash flow of Rs. 4 lakh per annum for
15 years beginning five years from the date of investment. What price should be fixed
if the same can be invested in financial instruments which can yield 8.50% per annum
for 5 years and 8% per annum for the remaining period?
A. 3192437
B. 2459135
C. 3697694
D. None of the above
Ans. B
Solution:
Present Value of the cash Flows for 15 years
Set: Begin
N = 15
I =8
PV = -3697694.74(solve)
PMT = 400000
P/Y = 1
C/Y = 1
want the required rate of return on the new portfolio to be 11 percent, what should
be the average beta for the new stocks added to the portfolio?
A. 2.45
B. 1.77
C. 1.25
D. 1.65
Ans. B
Solution:
Beta of the existing portfolio: Putting the values
RR = Rf + (Rm - Rf)
= 1.43
Beta of the new portfolio: Putting the values
RR = Rf + (Rm - Rf)
= 1.57
Beta of the added stocks =
1.57 = (700000/1700000) + (1000000/1700000)x1.43
= 1.77
8) Mr. Gupta purchased a flat worth Rs. 60 lakh in January 2008 by availing a housing
loan of Rs. 35 lakhs for tenure 20 years at the rate of 9 % per annum. The value of his
flat as in January 2013 has appreciated to Rs. 80 lakhs. What approximate value of
home equity can he consider in his flat towards his unencumbered interest after also
setting aside 18% of the appreciation value towards taxes and other costs to be
discharged on selling the unit?
A.
B.
C.
D.
4535253
3104746
2621249
3459960
Ans. A
Solution:
EMI on Housing Loan:
Set: End
N =240
I =9
PV = 3500000
PMT = -31490(solve)
P/Y = 12
C/Y = 12
Outstanding Balance after 5 years:
Press AMRT
PM1 = 1
PM2 = 60
Solve for BAL = 3104747
18% of the appreciated value to be kept aside for taxes and other costs = 360000
Home Equity in the flat = 8000000-3104747-360000
= Rs. 4535253
9) A stock of face value Rs. 10 is currently priced at Rs. 200. The company paid a dividend
of 125% in the previous fiscal year and the absolute amount of dividend is expected to
grow by on an average 5.5% year on year. The stock has a beta of 0.85. You expect the
market to give a return of 12.5% while the risk-free rate is 5%. You find out the extent
of undervaluation or overvaluation of the stock by dividend discount method and
state that_________.
A.
B.
C.
D.
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10) Your client Mr. A has his Rs. 50 lakh portfolio in 3 asset classes as on 1 st April 2009
comprised of Equity and Debt each in 45% allocation with the rest of the portfolio
invested in Gold ETF. Over the period upto 1st January 2013, Gold has given a total
return of 80% in the portfolio whereas equity and debt have returned 12% and 14%
respectively. You rebalance to 70% in equity with the other two asset classes equally
sharing the balance. What should be the transfer of money amongst asset classes.
A.
B.
C.
D.
Shift from Equity to Debt Rs. 1,52,962 and shift from Gold ETF to Equity Rs. 6,66,762
Shift from Debt to Equity Rs. 2,10,000 and shift from Debt to Gold ETF Rs. 1,05,000.
Shift from Debt to Equity Rs. 1667250 and shift from Gold ETF to Equity Rs. 2250
Shift from Debt to Equity Rs. 9,01,176 and shift from Gold ETF to Equity Rs.
15,69,288
Ans. C
Solution:
Size of the portfolio as on 1st April 2009 = Rs. 5000000
According to asset allocation ratio: (45:45:10) in (Equity: Debt: Gold ETF)
Equity = Rs. 2250000
Debt = Rs. 2250000
Gold ETF = 500000
Value of Equity as on 1 January 2013
Set: End
N =1
I =12
PV = -2250000
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FV = 2520000(solve)
P/Y = 1
C/Y = 1
Value of Debt as on 1 January 2013
Set: End
N =1
I =14
PV = -2250000
FV = 2565000(solve)
P/Y = 1
C/Y = 1
Value of Gold ETF as on 1 January 2013
Set: End
N =1
I =80
PV = -500000
FV = 900000 (solve)
P/Y = 1
C/Y = 1
Total Portfolio Size = Rs. 5985000
As per new asset allocation ratio (70:15:15)
Equity = Rs. 4189500
Debt = Rs. 897750
Gold ETF = 897750
Shift from Debt to Equity: (2565000-897750) = 1667250
Shift from Gold ETF to Equity: (900000-897750) = 2250
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