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

Caselet: Mrs. Anita Rao, aged 35, wants Rs 50 lakh for her daughter's education in 15 years. She expects a post-tax return of 10% per annum compounded annually on a lump sum invested today. Given (1.10)^15 = 4.177, approximately how much must she invest today as a lump sum?

She must invest about Rs 11.97 lakh today. The required corpus of Rs 50 lakh is discounted at 10% for 15 years by dividing by 4.177. Checking, Rs 11.97 lakh growing at 10% for 15 years gives approximately Rs 50 lakh.

  1. ARs 33.33 lakh
  2. BRs 20.90 lakh
  3. CRs 11.97 lakhCorrect
  4. DRs 8.35 lakh

Explanation

Present value = 50 / 4.177 = about Rs 11.97 lakh. Check: 11.97 x 4.177 = 50.0 lakh. Rs 20.90 lakh arises from multiplying instead of dividing incorrectly (50 x 0.418 is wrong base). Rs 33.33 lakh uses simple discounting at 50%/1.5, and Rs 8.35 lakh divides by 6.

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