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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Planning Basics

Caselet: Mr. Rao, aged 45, has a current retirement corpus of Rs 50,00,000 invested at an expected 8% annual return. He plans to retire at 60 and needs Rs 3,00,00,000 at that time. He makes no further contributions. Using (1.08)^15 = 3.172, what is the projected value of his existing corpus at 60, and the resulting shortfall?

The existing Rs 50,00,000 grows at 8% for 15 years to about Rs 1,58,60,000 using the factor 3.172. Subtracting this from the Rs 3,00,00,000 target leaves a shortfall of Rs 1,41,40,000.

  1. ACorpus Rs 1,58,60,000; shortfall Rs 1,41,40,000Correct
  2. BCorpus Rs 1,10,00,000; shortfall Rs 1,90,00,000
  3. CCorpus Rs 1,58,60,000; shortfall Rs 1,58,60,000
  4. DCorpus Rs 2,00,00,000; shortfall Rs 1,00,00,000

Explanation

FV = 50,00,000 x 3.172 = Rs 1,58,60,000. Shortfall = 3,00,00,000 - 1,58,60,000 = Rs 1,41,40,000. Rs 1,10,00,000 uses simple interest (8% x 15 = 120%). The third option wrongly sets shortfall equal to the corpus. Rs 2,00,00,000 is an unsupported figure.

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