NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products
Caselet: Mr. Rao, aged 62, retires with a corpus of Rs 1,20,00,000. He buys an immediate life annuity with Rs 80,00,000 at a rate of 7.5% per annum, paid annually in arrears, and invests the remaining corpus in a fund giving 8% per annum, withdrawing only the interest each year. What is his total annual income from both sources?
His total annual income is Rs 9,20,000. The annuity on Rs 80 lakh at 7.5% gives Rs 6,00,000, and the remaining Rs 40 lakh earning 8% gives Rs 3,20,000. Adding the two yields Rs 9,20,000 per year.
- ARs 9,20,000Correct
- BRs 6,00,000
- CRs 9,60,000
- DRs 11,00,000
Explanation
Annuity income = 80,00,000 x 7.5% = Rs 6,00,000. Remaining corpus = 1,20,00,000 - 80,00,000 = Rs 40,00,000; interest at 8% = Rs 3,20,000. Total = 6,00,000 + 3,20,000 = Rs 9,20,000. Rs 9,60,000 wrongly applies 8% to the full corpus.
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