Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Case Studies in Comprehensive Financial Advice

Caselet: Mr. Rao plans to retire in 20 years. His current annual expenses are Rs 8 lakh. Assume inflation of 6% a year, so expenses at retirement are Rs 8 lakh x 3.2 (rounded factor). He expects a post-retirement corpus to be 25 times first-year retirement expenses. What corpus does he need at retirement?

He needs Rs 6.4 crore. Inflation lifts the Rs 8 lakh expense to Rs 25.6 lakh at retirement, and 25 times that amount is Rs 640 lakh. Using today's expenses would understate the corpus.

  1. ARs 6.4 croreCorrect
  2. BRs 2.0 crore
  3. CRs 2.56 crore
  4. DRs 8.0 crore

Explanation

Expenses at retirement = 8 lakh x 3.2 = Rs 25.6 lakh. Corpus = 25 x 25.6 lakh = Rs 640 lakh = Rs 6.4 crore. Rs 2.0 crore uses current expenses (25 x 8). Rs 2.56 crore multiplies by 10 instead of 25, and Rs 8.0 crore uses a wrong multiple of 31.25.

Did you get it right without looking?

One question tells you little. A timed set on Case Studies in Comprehensive Financial Advice shows your real accuracy, how long you take and where you lose marks.

Practise Case Studies in Comprehensive Financial AdviceFree diagnostic mock

More Case Studies in Comprehensive Financial Advice questions