Solutions-Irawati Senna 1) B) 2) A) Nominal interest rate Effective rate Inflation Real rate of return 9.00% p.a. 9.31% p.a. 5.50% p.a. 3.61% p.a. (1+0.09/4)^4-1 (1+0.0931)/(1+0.055)-1 3) D) Amount of loan including processing fees 749,750 EMI Outstanding after paying 1-Aug-2010 installment 22,654 554,020 FV(11.5%/12,12,22654,-749750) prepayment penalty 22,161 554020*4% Amt to be paid alongwith penalty 576,11 4) B) 5) B) 6) C) 1st installment 1-Apr-2010 1,050,000 11,607 2nd installment 1-Sep-2010 2,100,000 23,49 3rd installment 1-Dec-2010 2,100,000 23,663 4th installment 1-Apr-2011 1,750,000 19,923 Final EMI payable 7,61 PMT(10.5%/12,15*12,-1050000) PMT(10.5%/12,15*12-5,-2100000) PMT(10.5%/12,15*12-,-2100000) PMT(10.5%/12,15*12-12,-1750000)
7) A) Balance in Irawati's bank account 2,726,000 Liquid MF 5.50% p.a. effective 0.45% p.a. monthly If Rs. 40,000 are drawn every month with immediate effect from this account, the number of months this arrangement will sustain 1.03 NPER(0.0045,40000,-2726000,0,1) i.e. 1 full months Return on equity MF = 11% p.a. Return on balanced MF = 9%p.a. Market value as on 20/03/2010 Equity Mutual Fund 2,647,000 Balanced MF 97,000 0.735% p.m. 0.7207% p.m. (1.11)^(1/12)-1 (1.09)^(1/12)-1 Market value at the end of the month till this arrangement lasts Equity MF,97,314 FV(1.11^(1/12)-1,1,-30000,-2647000,1) Balanced MF 2,52,433 FV(1.09^(1/12)-1,1,-10000,-97000,1) Balance period till retirement 135 months 1*12-1 Market value of investment till retirement Equity MF 2,73,421 FV(1.11^(1/12)-1,135,,-97314,1) Balanced MF 7,520,792 FV(1.09^(1/12)-1,135,,-252433,1) Total Corpus 36,304,213 Net Corpus (post-tax) 34,52,044 36304213*(1-4%) Monthly effective returns from risk free instruments Inflation rate (Monthly effective) Real Rate of return - Monthly effective - from risk free instruments If Rs. 1.6 lakh are drawn inflation-linked, no. of months for corpus to last 0.5262% (1.065)^(1/12)-1 0.4472% (1.055)^(1/12)-1 0.076% (1+0.005262)/(1+0.004472)-1 239 NPER(0.079%,160000,-3452044,0,1) 19.90 i.e. approx 20 years
) B) To sustain corpus of Rs. 3.4 crore for 25 years, i.e. 300 months, the yield required to generate Rs. 1.6 lakh in the beginning As the amount required is adjusted for inflation @ 5.5% p.a., the gross post-tax yield required to generate the real rate driving the desired equation Additional yield over and above risk-free rate 0.246% p.m. effective RATE(300,160000,-34000000,0,1) 2.99% p.a. effective (1+0.00246)^12-1.66% (1+0.0299)*(1+5.5%)-1 2.16%.66%-6.5% 9) B) 10) B) Current cost of trip 2,000,000 Cost of trip after 11 yrs 3,796,597 2000000*(1+6%)^11 Opening Contribution Int Closing 2009-10 659,000 70,000 57,53 (659000)*%+(70000)*(%)*(11/12) 76,53 2010-11 76,53 70,000 6,54 (7653+70000)*% 925,402 2011-12 925,402 70,000 79,632 (925402+70000)*% 1,075,034 2012-13 1,075,034 70,000 91,603 (1075034+70000)*% 1,236,636 2013-14 1,236,636 70,000 104,531 (1236636+70000)*% 1,411,167 2014-15 1,411,167 70,000 11,493 (1411167+70000)*% 1,599,661 2015-16 1,599,661 70,000 133,573 (1599661+70000)*% 1,03,234 2016-17 1,03,234 70,000 149,59 (103234+70000)*% 2,023,092 2017-1 2,023,092 70,000 167,447 (2023092+70000)*% 2,260,540 201-19 2,260,540 70,000 16,443 (2260540+70000)*% 2,516,93 2019-20 2,516,93 70,000 206,959 (251693+70000)*% 2,793,941 2020-21 2,793,941 70,000 229,115 (2793941+70000)*% 3,093,057 Shortfall in funds 703,540 3796597-3093057
11) B) Cost of Boarding school a year from now Total cost for both children 50,00 40000*1.06 1,017,600 5000*2 PV of such cost for the next 5 years if the corpus is invested in Nifty Index Fund yielding 11% p.a. 4,649,0 PV((1.11/1.06)-1,5,-1017600,,1) This PV is arranged by selling Equity shares Nifty ETF 2,592,000 327,000 Gold ETF 300,300 313000-(313000-16000)*0.1 Total Funds 3,219,300 12) B) Total funds available for both children 15,000,000 7500000*2 Investment at the end of 1st year 2nd year 3rd year 4th year 5th year 6th year Nifty Index Fund 3330000 7026300 11129193 9023404 665979 0 FMP 1210000 10472175 7976547 11717464 1571093 2390660 Shortfall 91340 24000000-2390660 13) C) 14) C) These funds are the PV in Index Fund, which alongwith an SIP for 12 months will accumulate to Rs. 46,49,0 after one year The amount of SIP is given by 4731 PMT((1+11%)^(1/12)-1,12,-3219300,46490,1) 15) B) Sales consideration of listed equity shares 2,592,000.00 a) Cost of acquisition 1500000 Long term capital gains on equity shares 1092000 Tax liability= Rs 0 b) Sales consideration of Nifty ETF 327000 Cost of acquisition 65000 Long term capital gains on nifty ETF 262000 Tax liability = Rs 0 c) Sales consideration of Gold ETF 313000 Cost of acquisition 16000
Long term capital gains on Gold ETF 127000 313000-16000 Tax liability 12700 127000*10% Sales consideration of gold coins sold 200000 Cost of gold = cost to the previous owner 45250 Since asset is held for more than 36 months indexation benefit is available Indexation would apply from the date of giving the gift Indexed cost of acquisition 117205 (632/244)*45250 Long term capital gains with indexation benefit 2795 200000-117205 Long term capital gains tax with indexation benefit 16559 2795*20% Total tax payable 29259 12700+16559
Solution: Ravi Mohan 16) B) 17) A) Total amount invested in Balanced MF scheme till March, 2010 90,000 5000*1 Value of investment in Balanced MF scheme as on March 20, 2010 125,000 Considering SIP of Rs. 5,000 till Sep.'2013 in Balanced MF scheme giving a return of 9% p.a., accumulated amount till end-sep.'2013 Monthly effective return in Balanced MF scheme 0.7207% (1.09)^(1/12)-1 Accumulated value 414,997 FV(0.7207%,42,-5000,-125000,1) Further investments are made @ Rs. 7,500 p.m. till he is 55 years in the same scheme, accumulated investment at end-mar.'36 9,123,03 FV(0.7207%,270,-7500,-414997,1) This further accumulates till 4 more years till he is of 59 years 12,77,977 912303*(1.09)^4 Total amount invested in scheme 2,325,000 5000*60+270*7500 Capital Gains 10,552,977 1277977-2325000 Tax on gains @ 10% 1,055,29 10552977*0.1 Net of Tax Corpus 11,22,679 1277977-105529 The annuity is drawn from beginning of 60th year of Ravi, when Abhilasha is 59 years of age Abhilasha's expecte life 0 years Number of months, annuity is required 252 months 12*(0-59) Current household expenses 20,000 Expenses inflated at pre-retirement stage 105,161 20000*1.055^31 Required expenses per month post-retirement 73,613 105161*0.7 Post-tax annuity returns 6.5% p.a. Inflation expected 5.5% p.a. Real rate of return 0.9479% p.a. (1+6.5%)/(1+5.5%)-1 Monthly effective real returns from annuity 0.076% p.m. (1+0.9479%)^(1/12)-1 Corpus desired for this annuity to last till Abhilasha's life time 16,35,092 PV(0.076%,252,-73613,0,1) For this desired Corpus at 60, amount invested in annuity at 59 15,07,59 1635092/(1+6.5%) Shortfall in Corpus 3,94,919 150759-1122679 Rs. 40 lakh approx.
1) B) Interest paid Interest 13 1-May-09 4149 2006-07 34000 14 1-Jun-09 4140 2007-0 51000 15 1-Jul-09 4131 Total 5000 16 1-Aug-09 4123 i) Interest for the previous year 2009-10 49195 17 1-Sep-09 4114 ii) Interest for the preconstruction 1 1-Oct-09 4105 19 1-Nov-09 4095 17000 20 1-Dec-09 406 21 1-Jan-10 4077 66195 22 1-Feb-10 406 23 1-Mar-10 405 24 1-Apr-10 4049 Total 49195 19) D) U/s 94(7) of Income Tax Act, all the three conditions mentioned below are satisfied. i) He has bought the units within a period of three months prior to the record date ii) He has sold the units within a period of 9 months after the record date iii) The dividend on such units received by him is exempted from tax The transactions of Ravi are as following 2-Apr-2009 cost of 1000 units bought @ Rs. 50 per unit 50000 1000*50 15-Jun-2009 Record Date 5-Mar-2010 sold 1000 units @Rs. 46 per unit 46000 46*1000 capital loss 4000 50000-46000 This loss cannot be claimed as short term loss for Tax computation as the dividend of Rs. 10,000 received is tax exempt 20) A) period i.e. from 1st Aug 2006 to 31-03-200 (1/5th of 5000) Total amount of interest allowable as deduction u/s 24 (i + ii)
21) A) Inflation 5.50% p.a. Balanced MF return 9.00% p.a. Time period Age 0 1 1 2 0 2 3 0 3 4 0 4 5 0 5 6 0 6 7 0 7 0 9 0 9 10 0 10 11 0 11 12 0 12 13 0 13 14 0 14 15 0 15 16 0 16 17 0 17 1 621201 1 19 655367 19 20 691412 20 21 14579 21 22 1539117 22 23 0 23 24 0 24 25 0 25 26 0 26 Present Value of Education and Marriage expenses 27 6034693 @9% p.a. 1571255 NPV Amount of Monthly investments 13,65 PMT((1+9%)^(1/12)-1,20*12,-1571255,0,1) 22) A) 23) B) 24) A)
25) A) 12-Oct-2006-6.50 -Dec-2007 0.30 30-Nov-200 0.50 20-Mar-2010 9.50 15.01% XIRR 26) B) Yes, Ravi is eligble for Gratuity under Payment of Gratuity Act The organization is covered under Gratuity Act He is in continuous service in this company for more than 5 years Arvind's Average Salary = 36000+1000 54,000 Years of Service 2004-05 4 months (Less than 6 months ignored for calculation) 2005-06 1 2006-07 2 2007-0 3 200-09 4 2009-10 5 Gratuity calculation (Average monthly salary*15/26*no. of year of continous service 155,769 54000*15/26*5
27) A) Balance as on 31st March, 2009 90,000 Investment to be made in end of March, 2010 3,000 Balance as on 31st March, 2010 100,200 (90000+3000)+90000*0.0 Quarterly Contribution 3000 (Begin of each calender quarter from April, 2010 onwards) Opening Balance Contribution during the FY FY From FY To Interest Closing Balance end of FY 2) B) 1-Apr-2010 31-Mar-2011 100,200 12,000,616 ((100200+3000)+(3000*9/12)+ 120,16 1-Apr-2011 31-Mar-2012 120,16 12,000 10,265 ((12016+3000)+(3000*9/12)+ 143,01 1-Apr-2012 31-Mar-2013 143,01 12,000 12,047 ((14301+3000)+(3000*9/12)+ 167,12 1-Apr-2013 31-Mar-2014 167,12 12,000 13,970 ((16712+3000)+(3000*9/12)+ 193,09 1-Apr-2014 31-Mar-2015 193,09 12,000 16,04 ((19309+3000)+(3000*9/12)+ 221,146 1-Apr-2015 31-Mar-2016 221,146 12,000 1,292 ((221146+3000)+(3000*9/12)+ 251,43 1-Apr-2016 31-Mar-2017 251,43 12,000 20,715 ((25143+3000)+(3000*9/12)+ 24,153
29) B) 0% of Present Expenses 16000 20000*0. Inflation Rate 5.50% p.a. 0.4472% p.m. Risk Free Returns 6.50% p.a. 0.5262% p.m. Inflation adjusted returns 0.9479% p.a. 0.076% p.m. present age of Abhilasha 2 years expected life of Abhilasha 0 years Life insurance needed 7,93,972 PV(0.076%,(0-2)*12,-16000,0,1) Rs. 0 lakh approx. 30) A) Calculation of Income Tax Liability of Ravi Mohan Basic Salary 432000 36000*12 DA 216000 1000*12 HRA 120000 10000*12 Transport Allowance 36000 3000*12 Less Exempt 9600 26400 36000-9600 Children education allowance 12000 1000*12 Less Exempt 1200 1000 12000-1200 Medical Reimbursement 4000 4000*12 Less Exempt 15000 33000 4000-15000 Entertainment allowance 36000 3000*12 Gross Income 74200 Less: Deduction u/s 24 60000 Less: Deduction u/s 0 C 100000 Less : deduction u/s 0 D 15000 175000 Net Income 699200 74200-175000 Tax Rates 160000-300000 10% 14000 300000-500000 20% 40000 699200-500000 30% 59760 113760 Add : Edu Cess 3412. 117172.