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

Mr. Rohan Mehta, aged 40, wants a retirement corpus at age 60. His current annual expenses are Rs 6,00,000. Assume inflation of 5% a year. Using the approximation (1.05)^20 = 2.65, what will be his annual expense at retirement in the first year?

His first-year retirement expense will be Rs 15,90,000. Current expenses of Rs 6,00,000 grow at 5% inflation for 20 years, which multiplies them by 2.65. Other options use the wrong base or too few years of inflation.

  1. ARs 12,00,000
  2. BRs 15,90,000Correct
  3. CRs 13,25,000
  4. DRs 6,30,000

Explanation

Future expense = 6,00,000 x 2.65 = Rs 15,90,000. Rs 12,00,000 uses simple doubling, Rs 13,25,000 uses only 2.65 x 5,00,000 (wrong base), and Rs 6,30,000 applies only one year of inflation.

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