NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning
Mr. Iyer needs Rs 50,000 per month in today's money at retirement. Inflation is 6% a year and retirement is 10 years away. Using (1.06)^10 = 1.79, what monthly expense, nearest rupee, will he need in the first year of retirement?
The monthly expense needed is Rs 89,500. Today's Rs 50,000 is inflated for 10 years at 6% using the factor 1.79, giving 50,000 multiplied by 1.79, which equals Rs 89,500 at the start of retirement.
- ARs 80,000
- BRs 89,500Correct
- CRs 94,000
- DRs 1,00,000
Explanation
Future expense = 50,000 x 1.79 = Rs 89,500. Rs 80,000 uses a lower, simple-type growth; Rs 94,000 uses a wrong compounding factor; Rs 1,00,000 simply applies 100% growth, ignoring compounding at 6%.
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