Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Personal Financial Planning

Caselet: Anil, 35, has a monthly take-home income of Rs 1,00,000. His monthly outflows are: EMI on home loan Rs 25,000, EMI on car loan Rs 10,000, credit card minimum dues Rs 5,000, and living expenses Rs 35,000. His total assets are Rs 60 lakh and total liabilities Rs 30 lakh. Which statement is correct about Anil's position?

Net worth equals assets minus liabilities, which is Rs 30 lakh. Debt service ratio equals total debt payments of Rs 40,000 divided by income of Rs 1,00,000, which is 40%. Living expenses are not debt payments and are excluded from the ratio.

  1. ANet worth is Rs 90 lakh and debt service ratio is 40%
  2. BNet worth is Rs 30 lakh and debt service ratio is 40%Correct
  3. CNet worth is Rs 30 lakh and debt service ratio is 75%
  4. DNet worth is Rs 30 lakh and debt service ratio is 35%

Explanation

Net worth = assets - liabilities = 60 - 30 = Rs 30 lakh. Debt service ratio = (25,000 + 10,000 + 5,000)/1,00,000 = 40%. Including living expenses would give 75%, which is wrong because they are not debt payments. Adding assets and liabilities gives 90 lakh, also wrong.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Personal Financial Planning shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Personal Financial PlanningFree diagnostic mock

More Introduction to Personal Financial Planning questions