NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Planning Basics
Ms. Kapoor needs Rs 8,00,000 in the first year of retirement and expects this to grow 6% annually. At retirement she assumes a post-retirement return of 10% and wants the corpus to last indefinitely with growing withdrawals. Using the growing perpetuity approach with the first withdrawal made at the end of year one, the corpus required is:
The required corpus is Rs 2,00,00,000. With withdrawals growing at 6% and a 10% return, the corpus equals the first-year withdrawal divided by the difference of 4%, so Rs 8,00,000 divided by 0.04 gives Rs 2 crore.
- ARs 80,00,000
- BRs 1,33,33,333
- CRs 2,00,00,000Correct
- DRs 50,00,000
Explanation
Corpus = 8,00,000 / (0.10 - 0.06) = 8,00,000 / 0.04 = Rs 2,00,00,000. Rs 80,00,000 ignores growth, Rs 1,33,33,333 divides by 6%, and Rs 50,00,000 divides by 16%.
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