NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Personal Financial Planning
Mr. Raman Iyer, aged 35, has monthly expenses of Rs 40,000 and an EMI of Rs 20,000. His adviser recommends an emergency fund equal to 6 months of total monthly outflow (expenses plus EMI). What emergency fund target should be set?
The emergency fund target is Rs 3,60,000. Monthly outflow includes expenses of Rs 40,000 and the EMI of Rs 20,000, totalling Rs 60,000, and six months of this amount gives Rs 3,60,000. Leaving out the EMI would understate the required fund.
- ARs 2,40,000
- BRs 3,60,000Correct
- CRs 1,20,000
- DRs 4,20,000
Explanation
Total monthly outflow = 40,000 + 20,000 = Rs 60,000. Six months gives 60,000 x 6 = Rs 3,60,000. Rs 2,40,000 ignores the EMI, which is the key mistake.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Personal Financial Planning shows your real accuracy, how long you take and where you lose marks.
More Introduction to Personal Financial Planning questions
- In the financial planning process followed by an investment adviser, which step comes immediately after gathering the client's data and dete…
- Meera Iyer has annual income of Rs 12,00,000. Her annual cash outflows are: living expenses Rs 6,00,000, EMI payments Rs 2,40,000 and insura…
- Ramesh, aged 30, has monthly expenses of Rs 40,000 and keeps an emergency fund covering 6 months of expenses. He holds the fund in a liquid …
- In the personal financial planning process, which step comes immediately after gathering the client's data and goals and analysing the clien…
- Which of the following is a characteristic of a SMART financial goal?
- In the personal financial planning process, which step comes immediately after gathering the client's data and defining the client's goals?