Retirement Planning CFP Mock Test

Simulated Test 01

Question 1

Marks: 1 An annuitant under an Annuity Policy of Insurance company is the following person: Choose one answer.

a. A person who receives annuity

b. A nominee.

c. An assignee.

d. None of the above.

Incorrect

Marks for this submission: 0/1.

Question 2

Marks: 1 What options does an employer have for superannuation arrangement?

Option (A) - Payment by employer

Option (B) - Funding through a trust. Choose one answer.

a. Only (A)

b. Only (B)

c. Neither (A) nor (B)

d. Both (A) & (B)

Incorrect


Question 3

Marks: 1 An eligibility criterion for withdrawal from a Provident fund for purchase of a house is

___________. Choose one answer.

a. membership of the fund for 5 years, minimum balance in members a/c Rs. 1,000,

purchase should be in favour of the member or member and spouse.

b. membership of the fund for 10 years, minimum balance in members a/c Rs. 1,000,


c. membership of the fund for 5 years, minimum balance in members a/c Rs. 5,000,


d. membership of the fund for 5 years, minimum balance in members a/c Rs. 1,000,

purchase should be in favour of the member or spouse.

Incorrect


Question 4

Marks: 1 An establishment with 100 employees, notified by Central Government and also that which

is a factory engaged in a specified industry, would be covered under Employees Provident

fund and Miscellaneous provision Act, 1952 if the number of employees, getting salary of

Rs.6500 or less, is/are _____________. Choose one answer.

a. 20 or more

b. It will be covered even if the income of all employees is above Rs. 6500

c. 1 or more

d. More than 20

Incorrect


Question 5

Marks: 1

Which of the following is a defined contribution plan?

Choose one answer.

a. Leave salary

b. Gratuity

c. Unrecognized Provident Fund

d. Voluntary Retirement Scheme

Incorrect


Question 6

Marks: 1 As an employee Mohan has come to you with his question on superannuation plans/ Annuity

Plans to get more educated with current scenario. The term 'Employee benefits' includes

contributions in which of the following categories of schemes? Choose one answer.

a. Non occupation disability Insurance

b. Unemployment compensation Insurance

c. Social security Scheme

d. Group Insurance Scheme

Incorrect


Question 7

Marks: 1 Deferred Annuity means ___________ Choose one answer.

a. purchase price could be paid in a single installment

b. annuity payments begin at the end of a selected term

c. purchase price could be paid in regular installments spread through the period of

deferment

d. All of the above.

Incorrect


Question 8

Marks: 1 Under EPF scheme, monthly pension after retirement is decided on _________. Choose one answer.

a. eligible service and pensionable salary

b. pensionable service and pensionable salary

c. actual service and pensionable salary


Incorrect


Question 9

Marks: 1 The maximum advance a member can take from his/her Provident Fund, for major illness

involving stay in hospital for at least 1 month, is ______. Choose one answer.

a. 12 months wage (basic + DA)

b. 24 months wage (basic + DA)

c. 6 months wage (basic + DA)

d. 36 months wage (basic + DA)

Incorrect


Question 10

Marks: 1

Which of the following statement/s is/are correct?

(A) Any salary surrendered by the employee to the central Government under the voluntary

Surrender of Salaries Act, 1961, will not be included while calculating his taxable income if

he is a Government employee.

(B) Any salary surrendered by the employee to the central Government under the

voluntary Surrender of Salaries Act, 1961, will not be included while calculating his taxable income if he is a private/public sector employee.

Choose one answer.

a. only (B) is correct

b. only (A)is correct.

c. Both (A) and (B) are wrong.

d. Both (A) and (B) are correct.

Incorrect


Question 11

Marks: 1 U/s 10 of the Income Tax Act, Gratuity paid to a Government Employee or employees of

local authorities is exempt upto a limit of ______________. Choose one answer.

a. Rs. 350000

b. Rs. 300000

c. Rs. 250000

d. None of the above

Incorrect


Question 12

Marks: 1 Deduction in respect of contributions to an annuity plan of certain pension funds under

Section 80C of IT Act is allowed to ___________ Choose one answer.

a. Any Assessee

b. Individual Assessee only

c. Individual or HUF

d. Individual, resident in India

Incorrect


Question 13

Marks: 1 The process of retirement planning would generally not involve ________. Choose one answer.

a. concentrating on maximizing returns on Present / Past Investments

b. projecting individual needs and goals into the future and making sound financial plan

c. making a plan for management & disposition of assets at death

d. planning for staying physically healthy & making necessary psychological adjustment

and to plan for housing and leisure / work

Incorrect


Question 14

Marks: 1 The matching contribution by the Government, to the Contributory Provident Fund, for its

employees, is ____________. Choose one answer.

a. 8.33%

b. 12%

c. 10%


Incorrect


Question 15

Marks: 1

Which of the following statement/s is /are correct?

(i) A fixed benefit annuity is an annuity under which the insurer guaranties that at least a

defined amount of annuity benefit will be provided for each rupee applied to purchasing the

annuity.

(ii) A fixed benefit annuity is an annuity under which the insurer guaranties that a fixed amount of annuity benefit will be provided for life.

Choose one answer.

a. Only (i) is correct.

b. Only (ii) is correct.

c. Both (i) & (ii) are correct

d. Both (i) & (i) are wrong.

Incorrect


Question 16

Marks: 1 Interest rate on Post Office Savings Bank is payable__________. Choose one answer.

a. monthly

b. quarterly

c. half yearly

d. Yearly

Incorrect


Question 17

Marks: 1 Reciprocal of P/E ratio, E/P ratio measures___________.

Choose one answer.

a. market price of a share

b. growth ratio

c. cost of debt

d. opportunity cost of capital

Incorrect


Question 18

Marks: 1 Mr. Prasad is a small-scale trader. He has a welfare scheme for his few employees, for

whom he runs a small provident fund, which is yet to be recognized. He also contributes to

this fund as an employer and matches the employee’s contribution. He has encouraged his

employees also to open PPF accounts to save tax and set aside funds for the future. Mr.

Prasad has called you to take a look at what he has been doing and advise him on the

choice of products for providing retirement benefits to himself and his employees. Can Mr.

Prasad open joint PPF accounts with his employees? Choose one answer.

a. A PPF account cannot be opened in joint names.

b. No, joint accounts can be held only by members of the same family or HUFs.

c. Yes, it can be opened, but the proceeds cannot be made payable to either or survivor.

d. Yes, provided the employee is the first holder.

Incorrect


Question 19

Marks: 1 A Provident Fund acquires its status of recognition by ___________. Choose one answer.

a. Labour Ministry

b. SEBI

c. PF Commissioner

d. IT Authority

Incorrect


Question 20

Marks: 1

Which of the following statement is correct? Choose one answer.

a. Payment under a deferred Annuity Plan starts after a specified term.

b. Payment under a deferred Annuity Plan starts on retirement.

c. Payment under a deferred Annuity Plan starts from the age of 55 years.

d. Payment under a deferred Annuity Plan starts immediately on payment of premium.

Incorrect


Question 21

Marks: 1 If the inflation rate is 4.9% and tax rate is 30% the required rate of return to maintain the

value of an investment will be ___________. Choose one answer.

a. 8%

b. 9%

c. 7%

d. 10%

Incorrect


Question 22

Marks: 1 An auditor of an Exempted Provident Fund can be: Choose one answer.

a. A member of FPSB India

b. A practicing Chartered Accountant

c. An employee of the Employee Provident Fund Organization

d. The auditor of the company, which is having the exempted provident fund

Incorrect


Question 23

Marks: 1 Business Risk is associated with Choose one answer.

a. Economy as a whole

b. International Market

c. Nature of Enterprise


Incorrect


Question 24

Marks: 1 Diversified Portfolio affects Systematic Risk in the following way: Choose one answer.

a. No Impact.

b. Huge Impact.

c. Little Impact.


Incorrect


Question 25

Marks: 1 Calculate the GDP of India with the given figures:

Consumption: $ 300 billion

Investments: $ 400 billion

Government spending: $ 300 billion

Exports: $ 150 billion

Imports: $ 200 billion Choose one answer.

a. $1,000 billion

b. $650

c. $1,050

d. $950

Incorrect


Question 26

Marks: 1 Amit is eligible for gratuity as per the provisions of the Payment of Gratuity Act, 1972.

Amit’s employer has agreed to pay him a gratuity amount that is higher than what is

stipulated under the Act. Amit accordingly would receive a final settlement of Rs. 5,00,000/-

on retirement. What is the tax status of this amount? Choose one answer.

a. The gratuity paid is exempt from Income Tax only to the extent of Rs.3,50,000/-.

b. The amount of gratuity payable to him cannot exceed Rs. 3,50,000/-.

c. There is no specific tax exemption for gratuity, in the Income Tax Act.

d. The Income Tax Act will only allow a maximum exemption upto 15 days wages per

completed year of service. The rest is taxable.

Incorrect


Question 27

Marks: 1

The investment limit in PO MIS, which can save tax under section 80C of the Income Tax

Act, 1961 to a resident individual is:

Choose one answer.

a. Min Rs. 6000/- and no upper limit

b. Min Rs. 6000/- Max 6 lakh per assessee

c. Min Rs. 6000/- Max 3 lakh per assessee


Incorrect


Question 28

Marks: 1

For defined benefit plans, which of the following changes in actuarial assumption would

increase plan costs to an employee?

1. Early retirement without a reduction in benefits.

2. Longer life expectancy predicted

3. An increase in inflation expectations regarding labor costs.

Choose one answer.

a. 1 & 2 only

b. 1 only

c. 1, 2 & 3

d. 2 & 3 only

Incorrect


Question 29

Marks: 1 Sundar has been an employee of a public sector undertaking for the past 25 years and is

retiring the next year. He is eligible for gratuity as per the provisions of the Payment of

Gratuity Act, 1972. He hopes to invest the proceeds along with the PF proceeds, in order to

fund his retirement. Sundar does not receive his gratuity 45 days after his retirement. What

are his rights? Choose one answer.

a. Sundar should receive his gratuity within 30 days after his retirement. The employer has

to pay penal interest for delay in the payment of gratuity.

b. Sundar should receive his gratuity within 60 days after his retirement. He should wait for

his settlement.

c. Sundar should receive his gratuity within 21 days after his retirement. The employer has

to pay penal interest at 15% for delay in the payment of gratuity.

d. There is no legally determined time frame for payment of gratuity. Sundar has legal

remedies if payment is not made "within reasonable time."

Incorrect


Question 30

Marks: 1 Investment in Senior Citizens Pension Plan qualifies for deduction u/s 80C of IT Act. Choose one answer.

a. True

b. False

c. Only upto Rs. 70,000

d. Data insufficient

Incorrect


Question 31

Marks: 1 Which one of the following statements is NOT true for a defined-benefit plan.

(i) It favors older participants.

(ii) Contributions are annual & arbitrary.

(iii) It requires an actuary. Choose one answer.

a. (i) only

b. (ii) only

c. (iii) only

d. None of the statements

Incorrect


Question 32

Marks: 1 No relief under section 89 of the Income Tax Act 1961 is admissible if taxable Gratuity is in

respect of services rendered for less than ________ years. Choose one answer.

a. 15

b. 5

c. 9


Incorrect


Question 33

Marks: 1 Which amongst the following is true about the interest received from Recognized Provident

Fund (RPF)? Choose one answer.

a. Not treated as income in the year of credit.

b. Not treated as income if the rate is equal to/less than 9.5%. Rate over and above this is

taxable

c. Fully exempt from tax.


Incorrect


Question 34

Marks: 1 A person wants to earn Rs. 5000 a month when the interest rate is 6%. What is the capital

required? Choose one answer.

a. Rs. 1000000

b. Rs. 10000

c. Rs. 500000

d. Rs. 50000

Incorrect


Question 35

Marks: 1 A person invests Rs. 70000 on the 1st of April for 5 year. The amount accumulated at 8% is

_______ Choose one answer.

a. Rs. 443515

b. Rs. 434515

c. Rs. 443155

d. Rs. 434155

Incorrect


Question 36

Marks: 1 Changing the weights of assets in the portfolio at regular intervals is called _____. Choose one answer.

a. Diversifying

b. Rebalancing

c. Concentrating


Incorrect


Question 37

Marks: 1 One of the biggest reasons to undertake portfolio evaluation is _________. Choose one answer.

a. poor planning

b. no analysis

c. changing needs of the individual

d. young age of the person for whom the plan ismade

Incorrect


Question 38

Marks: 1 If there is a requirement of capital protection then _________ instrument will not be used. Choose one answer.

a. Cash equivalents

b. Government securities

c. Mid cap shares

d. Bonds

Incorrect


Question 39

Marks: 1

The number of members covered in a group _______.

Choose one answer.

a. Are fixed

b. Remain the same

c. Fluctuate


Incorrect


Question 40

Marks: 1

If you want to tweak the cover on a policy and customize then this will not be possible in

________ Choose one answer.

a. Group Insurance

b. Individual insurance

c. Term Insurance

d. Unit linked policy

Incorrect


Question 41

Marks: 2

per month and Dearness Allowance is 40% of Basic Salary for retirement benefits. He

retired from his job on January 1, 2009 and shifted to his village. He is entitled to the following benefits at the time of retirement.

Gratuity = Rs.98000.

Pension from January 1, 2009 = Rs. 2000 per month.

Payment from recognized PF = Rs. 300000. Encashment of earned leave for 150 days = Rs. 36000.

He was entitled to 40 days leave for every completed year of service. He got 50% of his

pension commuted in lump sum w.e.f. March 1, 2009 and received Rs. 120000 as

commuted pension.

Gaurav contributes Rs. 900 per month to RPF to which his employer contributes an equal

amount. With these details you are required to help him with the following questions related

to previous year 2008-09. What amount will he get as the tax exemption under the

Payment of Gratuity Act, 1972?

Choose one answer.

a. Rs. 63,000/-

b. Rs. 67,846/-

c. Rs. 35,000/-

d. Rs. 3,50,000/-

Incorrect


Question 42

Marks: 2

Vishal is working with Amex Ltd since October 1, 1995. He is entitled to a basic salary of Rs.

6,000 per month. Dearness Allowance is 40% of Basic Salary for retirement benefits. He

retired from his job on January 1, 2009. He is entitled to the following benefits at the time

of retirement.

Gratuity = Rs. 98,000.

Pension from January 1, 2009 = Rs. 2,000 per month.

Payment from recognized PF = Rs. 3,00,000. Encashment of earned leave for 150 days = Rs. 36,000.

He was entitled to 40 days leave for every completed year of service. He got 50% of his

pension commuted in lump sum w.e.f April 1, 2009 and received Rs. 1,20,000 as commuted

pension. Vishal contributes Rs. 900 per month to RPF to which his employer contributes an

equal amount. What will be the amount of un-commuted pension for Vishal that will form part of his total income for the A.Y. 2009-10?

Choose one answer.

a. NIL

b. Rs. 4,000

c. Rs. 6,000

d. Rs. 1,000

Incorrect


Question 43

Marks: 2 Ashok receives leave encashment of Rs. 2,00,000 on account of accumulated leave of 240

days. He has completed 24 years of service and his last 10 months average monthly salary

is Rs. 10,000. What is the taxable portion of leave encashment for Ashok if he was entitled

to 40 days leave for every year of service? Choose one answer.

a. Rs. 1,00,000

b. Rs. 2,00,000

c. Nil

d. Rs. 2,50,000

Incorrect


Question 44

Marks: 2 Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and B

respectively, represented by standard deviation of the two investments, will be equal to the

volatility of the portfolio as a whole if _________________. Choose one answer.

a. A and B have a correlation of Zero

b. A and B have a correlation of 1

c. The portfolio is equally divided between A and B

d. The return on the portfolio is equal to the sum of returns of A and B.

Incorrect


Question 45

Marks: 2 Amit works as a seasonal employee in an establishment covered under Gratuity Act. His

date of joining is 01 Apr 1978, and works till 31 Mar 2008. His wages (Basic + DA) at the

time of retirement is Rs. 10000 per month. Work out his gratuity entitlement. Choose one answer.

a. Rs. 115385

b. Rs. 80769

c. Rs. 173077

d. Rs. 350000

Incorrect


Question 46

Marks: 2 An insurance firm has to create and sell a policy to cover the risk of partial disability to

workmen in a chemical factory. Which of the following is not a relevant factor in pricing the

policy? Choose one answer.

a. The ability of the insurance firm to deploy the premium and earn positive investment

returns on the funds.

b. The ability of the workmen to bear the cost of the policy.

c. The extent of probable disability created due to the work environment and its impact on

workmen.s earning capability.

d. The willingness of the management of the firm to bear part of the costs of the premium.

Incorrect


Question 47

Marks: 2

Raj joins ABC Ltd. on 25th April 1968. ABC has 30 employees. If he is expected to retire on

15th November 2008, and his last drawn salary for gratuity purposes is Rs. 26,000 per month,

what amount of gratuity would be exempted from tax on account of Raj’s gratuity entitlement if

ABC Ltd is covered under the payment of Gratuity Act, 1972?

Choose one answer.

a. Rs. 6,00,000.

b. Rs. 5,20,000.

c. Rs. 3,50,000.

d. Rs. 3,12,000

Incorrect


Question 48

Marks: 2 Kulkarni is running an unrecognised Provident Fund, because he has a smaller number of

employees in his firm. Which of the following is true about the tax status of such a fund? Choose one answer.

a. Only the employees. contribution is eligible for a rebate under Section 80C.

b. Kulkarni.s contribution as the employer is exempt from tax in his books.

c. The interest received on such unrecognised PFs is taxable every year.

d. Accumulated employee’s contribution is taxable at the time of retirement

Incorrect


Question 49

Marks: 2 The savings of a person is Rs. 8000 per month. What should the figure turn out to be each

year person has to accumulate Rs 25 lakh in 15 years at an earnings rate of 7%? Choose one answer.

a. Rs. 98486

b. Rs. 99486

c. Rs. 97486

d. Rs. 96486

Incorrect


Question 50

Marks: 2 Mr. Roy has been an employee of a public sector undertaking for the past 25 years and is

retiring the next year. He is eligible for gratuity as per the provisions of the Payment of

Gratuity Act, 1972. He hopes to invest the proceeds along with the PF proceeds, in order to

fund his retirement. Prior to his wedding,Mr. Roy had nominated his mother to receive his

gratuity. Is his wife eligible to receive the gratuity proceeds in the event of his death? Choose one answer.

a. All nominations made prior to the employee acquiring a family are invalid once an

employee has acquired a family.

b. As long as a valid nomination is in place, the payment of gratuity will be made only to

such nominees.

c. The payment of gratuity will always be according to the registered will, irrespective of

the nominations.

d. The information is not sufficient for giving an answer.

Incorrect


Question 51

Marks: 2 Mr. Rajan’s investment portfolio comprises Rs.2 lakh in equity, Rs.5 lakh in debt and Rs. 1

lakh in his bank current account. Over one year the returns on equity and debt are 5% and

12%. At the end of the year to maintain his current asset allocation, he needs to

_____________ Choose one answer.

a. Do nothing

b. He needs to move Rs, 10000/- from equity and Rs. 60000/- from debt to cash.

c. He needs move Rs.7500/- to equity from debt and Rs. 8750/-to cash from debt

d. He needs to invest Rs. 70000/- in debt and equity.

Incorrect


Question 52

Marks: 2

Which of the following financial transactions / events would affect net worth of your client?

(A) Repayment of a loan using fund from a savings account.

(B) Purchase of car which is 75% financed with 25% down payment.

(C) The Nifty is appreciating, and the client is holding Nifty Indexed Mutual Fund. (D) Interest rate increases and the client holds substantial bond portfolio.

Choose one answer.

a. (C) & (D)

b. (B) & (C)

c. (A), (C) & (D)

d. All of the above

Incorrect


Question 53

Marks: 2 A 10 year 8.0% bond (Face Value- Rs.1000, interest payable semi-annually) maturing 6

years from today is available at a yield to maturity of 6.0%. It is likely to be priced at

_______________. Choose one answer.

a. Rs. 1100

b. Rs. 1149

c. Rs. 1168

d. Rs. 1498

Incorrect


Question 54

Marks: 2 Raykar is an accomplished Financial Planner and is also an expert on derivatives and high

yielding bonds. He understands client requirements well and is able to come up with

appropriate portfolio restructuring ideas for clients. He believes in quickly moving clients

from one investment to another through a dynamic process of research and

recommendations. What according to the Rules relating to the Code of Ethics is the most

applicable in this case? Choose one answer.

a. He does not violate the Rules if he explains to the client the reasons and is able to show

that the moves are appropriate to the client.

b. He does not violate the Rules since he conducts and has access to research and advises

on products relevant to clients based on an understanding of their requirements.

c. He does not violate the Rules since he is an acknowledged expert and knows what is best

for his clients.

d. He violates the Rules as it amounts to active churning of client portfolios.

Incorrect


Question 55

Marks: 2 Mrs. & Mr. Arora are aged 55 and 58 years respectively. Both expect to work till they turn

65. Their only goal is to fund their retirement. Which of the following is likely to be an

appropriate asset allocation strategy for them? Choose one answer.

a. 10% sectoral equity, 20% diversified equity, 30% long-term debt, and 40% medium term

debt

b. 20% Sectoral equity, 60% diversified equity, 20% long-term debt

c. 30% Sectoral equity, 30% diversified equity, 40% cash/ liquid investments.

d. 80% long-term debt, 20% medium term debt

Incorrect


Question 56

Marks: 2 If the post tax rate of return on an investment is 8% and the inflation rate is 5% the real

rate of return is_______________. Choose one answer.

a. 3.5%

b. 3.0%

c. 2.86%

d. -3.0%

Incorrect


Question 57

Marks: 2 Sahil, age 43, can refinance Rs. 114042 at a 20-year rate for 7% and will incur closing cost

of 3% of the mortgage amount to be financed in the new mortgage balance. What will be

his new EMI on the mortgage under the circumstances to achieve his objective of no debt at

retirement (age 60)? Choose one answer.

a. Rs. 781.49

b. Rs. 957.56

c. Rs. 980.57

d. Rs. 986.29

Incorrect


Question 58

Marks: 2 Any possible occurrence which may have a negative financial implication can be plotted on a

graph with X axis measuring the frequency (low-high) and Y axis measuring the financial

impact (low-high). You can view the classification in four quadrants. Quadrant I - Low

frequency, Low Impact Quadrant II - Low frequency, High Impact Quadrant III – High

frequency, High Impact Quadrant IV - High frequency, Low Impact It would not be practical

to purchase insurance for events falling in _________________. Choose one answer.

a. Quadrant I & IV

b. Quadrant I, II & IV

c. Quadrant I, III & IV

d. Quadrant III

Incorrect


Question 59

Marks: 2 Which of the following is a correct interpretation of the Rules of Conduct pertaining to the

Ethic of Confidentiality? Choose one answer.

a. A Member must when requested by the client, provide to a person authorized by the

client, all original documents prepared or received by the Member in undertaking the

advisory task.

b. A Member owes to the Member.s partners or co-owners a responsibility to act in good

faith (expectations of confidentiality) only while in business together, not thereafter.

c. The Member shall maintain the same standards of confidentiality to employers as to

clients.

d. Under no circumstance, will any Member divulge any information or knowledge

regarding the FPSB India or its members that they may know or be exposed to.

Incorrect


Question 60

Marks: 2

Data available for Arvind and Neha is:

Assets: Cash = Rs. 50,000, Savings A/C = Rs. 50,000, MMMF (Money market mutual funds)

= Rs. 2,00,000,

Bonds = Rs. 2,50,000, Fixed Deposit = Rs. 1,50,000, Marketable Stocks = Rs. 5,00,000,

Equity based Mutual Funds = Rs. 30,000, Real Estate Vacant Plot = Rs. 5,00,000

Yearly Expenses = Rs. 3,60,000, Yearly Income Net Of Taxes = Rs. 6,00,000.

Liabilities: Car loan = Rs. 2,50,000, House Loan = Rs. 8,00,000.

Yearly Expenses include EMI for car and House Loan.

Find Basic Liquidity Ratio of the Couple

Choose one answer.

a. 3.33

b. 10

c. 26.67

d. 15.5

Incorrect


Question 61

Marks: 4 Nitish is a 30 year-old self employed youth and has been using the PPF account to

accumulate Rs. 30,000 per year, for his future needs. The PPF account provides a

compounded return of 8% p.a. He does not have a clear view yet on financial goals and

needs but has been saving as a habit, for the last 5 years. Nitish is willing to look at a

lifestyle after retirement that fits into a fixed Rs. 3,00,000 per annum spend, for an

estimated 15 years. What is the spending opportunity for Nitish, at the time of his

retirement at 60 years, given his saving and assuming a rate of 6% on his funds after

retirement? (Assumption: All computations for interest spend and savings compound

annually, assuming beginning of the period investment. Answers to be rounded off to the

nearest 5 rupees). Choose one answer.

a. Rs. 20,81,345

b. Rs. 18,54,425

c. Rs. 14,26,890

d. Rs. 24,94,570

Incorrect


Question 62

Marks: 4 Ajay has worked in two companies viz. A Co. and B Co. He retires from A Co. on Nov 30,

1990 (salary at the time of retirement Rs.2,600) and receives Rs. 22,000 as gratuity out of

which Rs. 20,000 were exempted. He also retires from B Co. on Dec 10, 2008 after 28 years

and 8 months of service and receives Rs. 2.90 lakh as death-cum-retirement gratuity. His

average basic salary drawn from B Co. for the preceding 10 months ending on Nov 30, 2008

is Rs. 18,200 per month. Further he receives Rs. 1,000 per month as DA, 80% of which

forms a part of his retirement benefits and 6% commission on turnover achieved by him.

Total turnover achieved by him during 10 months ending Nov 30, 2008 is Rs. 2 lakh. What

is the gratuity exempted from tax for Ajay for AY 2009-10? Choose one answer.

a. Rs. 290000

b. Rs. 2,80,000

c. Rs. 3,30,000

d. Rs. 2,62,800

Incorrect


Question 63

Marks: 4 Vinita was recently divorced and has two children. The divorce decree requires that she pay

1/3 of the college tuition cost for her children. The tuition cost is currently Rs. 15,000 per

year and has been increasing at 7% per year. Her son and daughter are 12 and 16

respectively and will attend college for four years beginning at age 18. How much should

she save each month, beginning today for the next five years to finance education for both

the children (in nearest rupee)? Assume that her after-tax rate of return will be 9% and that

general inflation has been 4% p.a. Choose one answer.

a. Rs. 750

b. Rs. 745

c. Rs. 2,235

d. Rs. 2,500

Incorrect


Question 64

Marks: 4 Nirav, aged 30, wants to retire at 45. He wants to maintain his present living standard. He

spends

Rs. 3,25,000 a year. He is expected to live upto 85. Inflation is to be assumed at 4% p.a

and expected returns are 7% p.a. What is the nest egg required by Nirav at his age 45 and

what amount should he save every year end to meet his plan? His present investments are

Rs 10,00,000. Choose one answer.

a. Nest egg and savings required will be Rs. 1,41,82,828 and Rs. 4,54,606 respectively.

b. Nest egg and savings required will be Rs. 1,47,73,065 and Rs. 7,40,530 respectively.

c. Nest egg and savings required will be Rs. 1,27,73,065 and Rs. 4,38,300 respectively.

d. Nest egg and savings required will be Rs. 2,51,00,065 and Rs. 5, 41,093 respectively.

Incorrect


Question 65

Marks: 4 Laxman is an NRI who has been working in the US for the past 5 years. He is aged 40. He

has been saving Rs. 8 lakh per annum for the past 5 years and hopes to save the same

amount for the next 10 years that he plans to live in the US. He would like to return to India

10 years from now. The inflation-adjusted monthly income requirement for Laxman, as

estimated by the planner, is Rs. 80,000 in the year in which he returns to India. It is

estimated that inflation would remain at an average of 3% p.a for the next 30 years. His life

expectancy is placed at 70 years. However if the estimated spend per month, for his family

is Rs. 90,000 p.m., and the rate of inflation is 4% p.a, how long will his savings last?

Assumption: His investments will earn a rate of interest of 6% pa. Compounding to be done

on annuity certain basis throughout the problem. Choose one answer.

a. The funds will last until Laxman is 81 years old.

b. The funds will not be adequate to fund his estimated life span of 70 years.

c. The funds will last until Laxman is 72 years old.

d. The funds will exhaust before Laxman is 71 years old.

Incorrect


Question 66

Marks: 4 Ahmed’s current annual expenditure is Rs.100000/-. He is 30 years old and expects to retire

at age 55. His annual expenses are estimated to rise by 6% p.a. and his life expectancy is

75 years. His post retirement annual expenses are estimated to be 80% of his pre-

retirement expenses. What will be his expenses onthe first year of his retirement? Choose one answer.

a. Rs. 3,47,425/-

b. Rs. 3,43,350/-

c. Rs. 4,29,187/-

d. Rs. 4,02,350

Incorrect


Question 67

Marks: 4 Mr. Nirav an affluent broker wants to retire at 45. He wants to maintain his present living

standard. He spends Rs.3,25,000/- a year. He is expected to live upto 85. Inflation is to be

assumed at 4% and expected returns are 7% p.a. How can he achieve this? He is at present

30 years old. What is the nest egg required at age 45 and what amount shall he save every

year to meet his plan? His present investments are Rs.10,00,000/-.(Assumption: All

computations for interest, spend and savings compound annually, assuming beginning of

the period investment). Choose one answer.

a. Nest egg and savings required will be Rs.1,47,73,065/- and Rs.7,40,530/- respectively.

b. Nest egg and savings required will be Rs.1,41,82,819/- and Rs.4,24,865/- respectively.

c. Nest egg and savings required will be Rs.1, 27,73,065/- and Rs.4,38,300/- respectively.

d. Nest egg and savings required will be Rs.2, 51,00,065/- and Rs.5, 41,093/- respectively

Incorrect


Question 68

Marks: 4 Ms.Rekha is 45 years old and plans to retire at 50. Her life expectancy is 70 years.

Ms.Sushma, her Financial Planner, estimates that her client will require Rs.45,000/- in the

first month after retirement. Inflation rate is 4% p.a. and the rate of return is 6% p.a. What

will be the savings per year required in order to meet this? Choose one answer.

a. Rs. 15,90,000/- (Approx)

b. Rs. 14,80,000/- (Approx)

c. Rs. 16,90,000/- (Approx)

d. Rs. 12,40,000/- (Approx)

Incorrect


Question 69

Marks: 4 Aditi is 30 years old. She deposits 25000 at the beginning of each year in deferred annuity

scheme as a part of her retirement planning. How much will be in her account after 25

years if her savings earn 9.5% compound annual interest? Choose one answer.

a. Rs. 2474985

b. Rs. 2487216

c. Rs. 2414854

d. Rs. 2497857

Incorrect


Question 70

Marks: 4 Seema has been an employee of a public sector undertaking (covered under the payment of

Gratuity Act, 1972) for the past 20 (completed) years and is retiring on the 31st of

December this year. Her monthly salary at retirement is expected to be Rs. 20000. The

amount of gratuity that she will receive is ________. Choose one answer.

a. Rs. 241245

b. Rs. 242308

c. Rs. 243579

d. Rs. 241940

Incorrect


Question 71

Marks: 4 Mrs. Shah retired from Ace Manufacturing Co. Ltd. Mumbai on 31/12/2008. Ace is covered

under the Payment of Gratuity Act, 1972. She served for 30 years and 9 months. Ace paid

her a Gratuity of Rs.400000. Her monthly basic salary at the time of retirement was Rs.

9000 p.m. and Dearness Allowance was Rs. 4000 p.m. House Rent Allowance was Rs. 1500

p.m. Mrs. Shah lives in an ownership flat. Compute: Taxable amount of Gratuity & Taxable

amount of HRA of Mrs. Shah. Choose one answer.

a. Gratuity: Rs. 160000; HRA: Rs.20000

b. Gratuity: Rs. 157500; HRA: Rs.16000

c. Gratuity: Rs. 170000; HRA: Rs.18000

d. Gratuity: Rs. 167500; HRA: Rs.18000

Incorrect


Question 72

Marks: 4 Sumeet, aged 25, plans to retire at age 55. His life expectancy is 75. His current annual

expenditure is Rs. 250000. He estimates no reduction in his expenses post-retirement. If

interest rate is expected to be 8.5% and inflation is 5% p.a. estimate how much will he

have to save per annum in order to achieve his target, provided he does not wish to leave

an estate? Choose one answer.

a. Rs. 129696

b. Rs. 125054

c. Rs. 117154

d. Rs. 120963

Incorrect


Question 73

Marks: 4 Mr. Jay Mehta wants to start saving for his son Aryan’s (age 5 years) higher education in

the USA. He will spend six years at the college in the USA beginning at age 18. The present

cost structure of higher education in the USA is:

Year 1 Rs. 15 lakh

Year 2 Rs. 17 lakh

Year 3 Rs. 19 lakh

Year 4 Rs. 21 lakh

Year 5 Rs. 23 lakh

Year 6 Rs. 25 lakh

The cost of education is increasing by 6% every year. If Jay starts investing in an equity

Mutual Fund (15% pa) how much he need to deposit at the end of each year to pay for

Aryan’s higher educational requirements? Assume that educational expenses are withdrawn

at the beginning of each year and that the last deposit will be made at the beginning of the

last year of Aryan’s college education. Choose one answer.

a. Rs. 4,37,553/-

b. Rs. 4,74,700/-

c. Rs. 5,03,186/-

d. Rs. 5,45,906/-

Incorrect


Question 74

Marks: 4 Which of the following is a tort of negligence? Choose one answer.

a. Mr. Joy was playing golf. He swings a new golf club on the fairway and the head of the

club flies off, and hit another golfer who was standing 20 feet away.

b. Mr. Vishal takes medication that he knows makes him drowsy and then proceeds to

drive. He gets into an accident injuring the passengers in another car.

c. Mrs. Jaya locks Ms. Rani in a room to prevent her from leaving the building.

d. Mrs. Priti experienced a sudden surge of chest pain while driving, which causes her to

lose control of her car and hit another car.

Incorrect


Question 75

Marks: 4 Sachin is aged 25 years and has annual expenditure of 2 lakhs. If the inflation is 6 % for 1st

10 years , 7 % for next 15 years and 5 % for next 5 years, calculate his expenditure at

retirement ( 55 yrs ) at 80 % replacement ? Choose one answer.

a. 457126

b. 475126

c. 451726

d. 1261222

Retirement Planning CFP Mock Test

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