Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Personal Financial Planning

Mr. Reddy, aged 35, earns Rs 12 lakh a year. His annual expenses are Rs 7 lakh and his annual loan repayments are Rs 3 lakh (included in the Rs 7 lakh). He has assets of Rs 50 lakh, including a Rs 30 lakh house, and liabilities of Rs 20 lakh. He saves the surplus of income over expenses. What are his net worth and savings rate (savings as a percentage of income)?

His net worth is Rs 30 lakh and his savings rate is about 41.7%. Net worth is assets of Rs 50 lakh minus liabilities of Rs 20 lakh. Savings are income of Rs 12 lakh minus expenses of Rs 7 lakh, which already include loan repayments, giving Rs 5 lakh, or 41.7% of income.

  1. ANet worth Rs 30 lakh; savings rate about 41.7%Correct
  2. BNet worth Rs 30 lakh; savings rate about 25%
  3. CNet worth Rs 70 lakh; savings rate about 41.7%
  4. DNet worth Rs 20 lakh; savings rate about 58.3%

Explanation

Net worth = 50 - 20 = Rs 30 lakh. Savings = 12 - 7 = Rs 5 lakh, since loan repayments are already in expenses. Rate = 5/12 = 41.7%. The 25% option wrongly deducts the Rs 3 lakh repayments again (2/12 is 16.7%, and 3/12 is 25%), and Rs 70 lakh adds liabilities.

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.

Practise Introduction to Personal Financial PlanningFree diagnostic mock

More Introduction to Personal Financial Planning questions