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

Caselet: Ms. Iyer, aged 30, wants a retirement corpus of Rs 2 crore at age 60 and has nothing saved. Assume she invests a lump sum today at 10% a year compounded annually for 30 years. Use (1.10)^30 = 17.45. Approximately what lump sum is needed today?

The lump sum required is the present value of Rs 2 crore discounted at 10% for 30 years. Dividing 2 crore by 17.45 gives about Rs 11.46 lakh. Multiplying or ignoring compounding gives wrong amounts.

  1. ARs 6.67 lakh
  2. BRs 20 lakh
  3. CRs 11.46 lakhCorrect
  4. DRs 34.9 lakh

Explanation

Present value = 2,00,00,000 / 17.45 = about Rs 11.46 lakh. Rs 6.67 lakh divides by 30 and then ignores compounding incorrectly, and Rs 34.9 lakh multiplies instead of dividing.

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