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

Caselet: Mr. Rohan Mehta, aged 40, earns Rs 20 lakh a year. His monthly expenses are Rs 80,000 and he has a home loan EMI of Rs 30,000 per month which is included in the Rs 80,000. His adviser uses the rule that an emergency fund should cover 6 months of all essential outflows including EMIs. Rohan holds Rs 3,60,000 in a savings account earmarked for emergencies. What is the shortfall in his emergency fund?

The shortfall is Rs 1,20,000. Six months of total outflow of Rs 80,000, which already includes the EMI, requires Rs 4,80,000. Rohan holds Rs 3,60,000, so he needs another Rs 1,20,000. Adding the EMI separately would double count it.

  1. ARs 1,20,000Correct
  2. BRs 60,000
  3. CRs 3,00,000
  4. DRs 1,80,000

Explanation

Monthly outflow including the EMI is Rs 80,000 because the EMI is already included in it. Six months equals Rs 4,80,000. Available fund is Rs 3,60,000, so shortfall is Rs 1,20,000. Adding the EMI again (Rs 1,10,000 x 6 = Rs 6,60,000) would double count and give Rs 3,00,000.

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