2.1.a fpsb numericals

8/10/2019 2.1.a Fpsb Numericals

1/48

A training institute bought 50computers at a total cost installed forRs. 25 lakh. The set up came intooperation on 1st April, 2012. The costof a similar new computer in duecourse declined to Rs. 42,000. The

industr norm of the depreciationcharged on the computers is !0" onwritten down #alue basis. At what

appropriate #alue he should insure


2/48

Solution:

&ost of ac'uisition of computers( 1stApril, 20122,500,000 Rs.

)epreciation cahrged !0"p.a.

&urrent replacement cost 2,100,000

Rs. 42000*50 Appropriate #alue to be insured

1,470,000 Rs. 2100000*(1-30%)


3/48

A +ith ro-t life insurance polic with a trackrecord of oering bonuses at Rs. 50 per thousandsum assured /A has a premium dierential ofRs. !0 per thousand A from the similar pureterm polic. The corresponding pure term co#erof 20 ears and A Rs. 12 lakh is a#ailable at Rs.,30 p.a. our client has recentl paid 1thpremium in the +ith ro-t polic. ou e#aluate

the dierential returns from +ith ro-t polic incase of mortalit toda from the perspecti#e of3" p.a. return. ou -nd that 666.


4/48

Solution:

rice dierential in premium per thousand!0 Rs.

rice dierential in premium for a Rs. 12 lakhpolic !,000 Rs. !0*120000071000

8stimated bonuses on maturit of with pro-tpolic 90,000 Rs. 50*1*120000071000

Rate e$pected on maturit proceeds 5.3" p.a.RAT8/1,(!000,0,90000,1

Return dierential from 3" p.a. -2.22% p.a.5.78% - 8%


5/48

:r. A has a gross annual salar of Rs. 10 lakh of which hesa#es 25" including mandator sa#ings and #oluntarsstematic in#estments. Another !5" goes towardsser#icing of housing and car loans and ta$es. ;is


6/48

Solution:

?ross present salar 1,000,000 Rs. p.a.

8:@ and Ta$es !50,000 Rs. p.a. 1000000*!5"

tatutor and long term in#estments 250,000 Rs. p.a. 1000000*25"

;ousehold e$penses 400,000 Rs. p.a. 1000000(!50000(250000

@ncreased ?ross alar 1,!00,000 Re#ised ;ousehold e$penses4!2,000 400000*/13"

Re#ised out go towards 8:@ and Ta$es !39,000 !500001!00000*!"

tatutor and long term in#estments 29,500 2500001!00000*1.5"

Amount a#ailable for in#estments in li'uid fund 209,500 1!00000(

4!2000(!39000(29500 Re'uired li'uid fund reser#e 233,000 4!2000*3712

Time re'uired for building re'uired reser#e 1.!4 ears2330007209500

:onths re'uired 1.50 months 1.!4*12


7/48


8/48

Solution:

&ost of land in 20023,000,000 Rs.

&ost of construction in 2005 9,000,000 Rs.

&ost escalation 12"p.a. &ost of construction in 201! 22,23!,9

9000000*/112"C3

)epreciation rate /on D: method( 3 ears" p.a.

Therefore, sum insured on market #alue basis11,587,508 Rs. 22283669*(1-8*6%)


9/48

An e$ecuti#e purchased an annuit for a lumpsum Rs. 35 lakh when he was of 5! ears andhad in dependents a non(working spouse of

age 43 and a son of age 25. En reaching age0, he e$pects at least one, himself or hisspouse, to sur#i#e till 35 ears and contractsan immediate life annuit with return of

purchase price at Rs. 10.15 lakh p.a. #estedagainst the purchase price of Rs. 1.1 crore.+hat return is e$pected from the #estingdate%


10/48

Solution:

Age of the lawer on #esting date 0 ears

Age of spouse on #esting date 55 ears

:a$imum annuit period e$pected !0 ears Annual annuit amount 1,015,000 Rs.

urchase price of annuit on #esting date1,100,000 Rs.

8ecti#e return e$pected from annuit 6.73%p.a.RA!(30,1015000,-

16100000,16100000,1)


11/48

:r. A has in#ested in an instrumentfor three ears. The instrument hasproduced a return of 11",15" and

12" in the three ears. ou as :r. A=sad#isor ha#e obser#ed that the rulinginFation in these three ears

respecti#el was 4"," and 3". ou-nd the real rate of return which :r.A has recei#ed as 666666.


12/48

Solution:

@f the amount in#ested is Rs. 100

Real #alue of the in#estment at ear endG 1

10.!092100*/111"7/14" Real #alue of the in#estment at ear endG 2

114.10!9310.!*/115"7/1"

Real #alue of the in#estment at ear endG !

113.959132 114.1*/112"7/13"

&A?R of real return 5.96%(118.96"100)#(1"3)-1


13/48

:r. A had taken a loan of Rs. 40 lakh in Hul 2010at a Foating rate of interest of 10" p.a for tenureof 20 ears from a housing -nance compan. Thecompan sent a notice raising the interest rate to

10.5" p.a. eecti#e Hanuar 2012 therebincreasing 8:@. ;e decides to re-nance the loan at10.25" from a bank which charges a processingfee of 1" of loan sanctioned. +hat absolute

amount he stands to sa#e in the remaining tenureif the outstanding loan amount as at end of :arch2012 is re-nanced so that the new loan terminatesas per original tenure%


14/48

Solution:

Tenure of loan 240 months

Doan amount4,000,000 Rs.

@nitial Rate of @nterest 10.00" p.a.

8:@ began in Hul 2010 !3,01 Rs. :T/10"712,240,(4000000,0,0

8:@ installments repaid till )ecember 2011 13

Doan outstanding as at )ecember 2011 !,393,10 Rs. B/10"712,240(13,(!301,0,0 Re#ised Rate of @nterest beginning Hanuar 2012 10.5" p.a.

Iew 8:@ eecti#e Hanuar 2012 40,51 Rs. :T/10.5"712,240(13,(!39310,0,0

Doan outstanding to be repaid to


15/48

A compan has retirement age as 53 ears.An emploee at age !5 e$pected incrementsof " p.a. as per compan polic when his

annual net earnings were Rs. lakh. After 5ears, he got ne$t cadre and his annual netearnings became Rs. 9 lakh. The incrementsin the re#ised cadre are at 9" p.a. ;e hadpurchased a life co#er b income replacementmethod at age !5. +hat additional co#er isre'uired if he e$pects his in#estments to ield9.5" p.a.%


16/48

Solution:

&urrent net earnings 00,000 Rs.

Rate of increment of net earnings .0" p.a.

&urrent age !5 ears

Retirement age53 ears

Rate of return from in#esting9.5" p.a.

8$pected insurance b income replacement at age !5 10,3!0,0!5Rs. B//19.5"7/1"(1,53(!5,(00000,0,1

Age when promoted to new cadre 40 ears

Re#ised net earnings at age 40900,000 Rs.

Re#ised Rate of increment of net earnings 9.0" p.a.

Re#ised insurance co#er15,53,23 Rs. B//19.5"7/19"(1,53(40,(900000,0,1

Additional co#er needed4,5,252 Rs. 155323(103!00!5


17/48

A departmental store has rented a space in a :all.The tore took insurance of goods housed in theshop for a #alue of Rs. 2.1 crore. The sur#eorassessed the a#erage #alue of goods stored at the

facilit at Rs. 2.5 crore. The tore in its 'uarterlstock taking on !1st )ecember 2012 assessed#alue of the goods at landed cost of Rs. 1.3 crore.En 1th Hanuar 201! the tore had a ma>or -re

destroing all goods stored therein. The tore asper sales records had sold goods for Rs. !5 lakh inthe interim, making a pro-t of Rs..5 lakh. Theadmissible amount of claim should be 6666666.


18/48

Solution:

@nsurance taken for #alue of goods 21,000,000 Rs.

Assessed #alue of goods for which @nsurer co#ered the risk25,000,000 Rs.

Balue of goods at landed cost on !1st )ecember 2012 13,000,000

Rs. ?oods sold to customers till 1th Hanuar 201! !,500,000 Rs.

ro-t made on selling goods after !1st )ecember 2012 50,000 Rs.

Danded cost of goods sold after !1st )ecember 2012 2,50,000 Rs.!500000(50000

Balue of goods destroed for which insurance was taken 15,250,000Rs. 13000000(250000

Admissible amount of insurance claim 12,310,000 Rs.15250000*/21000000725000000


19/48

An entrepreneur setting up a leather processing unitpurchased a land in 200 for Rs. 50 lakh and gotspecialiLed construction done in 200 for Rs. 1. crore.@n :arch, 2003 the processing plant was constructed at

a cost of Rs. 2 crore. The cost of such construction andplant are escalating at 10" p.a. The corrosi#e nature ofchemicals re'uires depreciation on plant as well aspremises at 15" p.a. on written down #alue basis. As in201!, what additional reser#es should be created b

the compan apart from depreciation reser#es and theresidual insured #alue of plant and premises toreinstate the facilit in case it is destroed in acalamit%


20/48

Solution:

&ost of land 5,000,000 Rs.

&onstruction cost of premises 1,000,000 Rs.

&onstruction done in 200

&ost of plant M machiner 20,000,000 Rs.

lant installed in 2003

)epreciation rate on w(d(# method 15"p.a.

8scalation cost 10"p.a.

ear of reinstatement considered 201!

&urrent cost of reinstatement or premises 23,!44,9 Rs. 1000000*/110"C/201!(200

&urrent cost of reinstatement of plant!2,210,200 Rs. 20000000*/110"C/201!(2003

Total cost of reinstatement of the facilit 0,555,1 Rs. 23!449!2210200

)epreciation reser#es charged on premises in the K7 9,95,03 Rs. 1000000(/1000000*/1(15"C/201!(200

)epreciation reser#es charged on plant in the K7 11,125,394 Rs. 20000000(/20000000*/1(15"C/201!(2003

Total reser#es on premises and plant 21,091,502 Rs. 9950311125394

Residual @nsured #alue of the plant 14,903,499 Rs. /100000020000000(21091502

Therefore, additional reser#es to be created 24,555,1 Rs. 05551(21091502(14903493


21/48

AR8&@AT8) BADN8 O !000000

P1000000*/110"C20000000*/110"C5

Total cost of reinstatement of thefacilitP 0,555,1/3!449!2210200


22/48

A famil=s monthl e$penditure is Rs.40,000. The earner accounts for 15"of the e$pense. ;e wants to co#er his

famil=s inFation(ad>usted e$pensesfor the ne$t 40 ears consideringa#erage inFation at 5.5" p.a. and

the in#estment return at .5" p.a.The appro$imate life insuranceneeded is 666666.


23/48

Solution:

&urrent household e$penses 40,000 Rs.

elf consumption 15.0" p.a.

Iet 8$penses !4,000 Rs. 40000*/1(15"


24/48

A single mother, aged !!, earns Rs..5 lakh p.a. out of which ta$es andself(e$penses account for Rs. 1.5

lakh p.a. ;er salar is e$pected torise 10" p.a. whereas ta$es andpersonal e$penses are likel to rise

b " p.a. @f she e$pects to work till53 ears, what economic #alue canou enumerate on her life, if she is

con-dent of getting a return of 9"


25/48

Solution:

&urrent gross earnings 50,000 Rs.

Rate of increment of gross earnings 10"p.a.

&urrent ta$es and e$penses 150,000 Rs.

Rate of increment of ta$es and espenses " p.a. Rate of return from in#esting9" p.a.

&urrent age !! ears

8$pected earnings potential upto53 ears

B of gross earnings, discounted at growth rate 20,9,02

Rs. B//19"7/110"(1,53(!!,(50000,0,1 B of ta$es7e$penses, discounted at growth rate 2,!,4!2 Rs.

B//19"7/1"(1,53(!!,(150000,0,1

B of net earnings 18,229,596 Rs. 20967027-2737432


26/48

The earning member of a familaged !5 ears e$pects to earn tillne$t 25 ears. ;e e$pects an annual

growth of 3" in her e$isting netincome of Rs. 5 lakh p.a. @f heconsiders an a#erage in#estment

ield of " till his life e$pectanc of30 ears, what economic #alue couldbe described to his life toda%


27/48

Solution:

&urrent net income 500,000 Rs. p.a.

Rate of increase of net income 3" p.a.

@n#estment ield from in#esting " p.a.

Iumber of ears the incme is e$pected to

continue25 ears 8conomic #alue 15,35,2 Rs.

B//1"7/13"(1,25,(500000,0,1


28/48

:r. Q has a 25(ear endowment polic, the annualpremium being Rs. 15,350 for a sum assured of Rs.12 lakh. ;e has paid 13 premiums and has Rs.

,50,000 towards declared bonuses on this polic. ;ehas met his ob>ecti#es and has sucient co#er andwealth support. ;e does not wish to continue in thepolic. ;e has the option to either make this policpaid up, or surrender the same at a factor of 5" of

the paid up #alue. @f he chooses to surrender, whatreturn he should earn on the surrender #alue to osetthe paid up #alue, when due%


29/48

aid up #alue of the polic 1,514,000Rs. 1200000*1372550000

urrender #alue P 5" of the abo#e paidup #alue1,1!5,500 Rs. 1514000*5"

Remaining term of the polic ears

Rate to be earned on surrender #alue toreach paid up 4.20% p.a.RA!(7,0,-1135500,1514000,) $AR


30/48

A 40 &'a ol al' ini+iual an 't a 15-&'a it/-pot li' insuan' poli& o aopan& at an annual p'iu o Rs. 10,046/i/ i+'s a su assu' o Rs. 1.5 la/.

/' opan& /istoiall& /as 'la''+'siona& onus's an t'inal onus p't/ousan su assu' at Rs. 35 an Rs. 80,'sp'ti+'l&. A t' plan it/ sa' li' an

ot/' paa't's is 'n'all& a+ailal' oan annual p'iu o Rs. 3,565. in t/''tun on in+'st'nt opon'nt o t/'opan&s poli& on su+i+in t/' t'.


31/48

Solution:

remium of with(pro-t polic12,04 Rs.

remium of term polic !,55 Rs.

8$cess premium on in#estmentcomponent 3,431 Rs.

Terminal #alue on sur#i#ing the term

240,50 Rs. a' 6 Return on in#estment component .!"

p.a. RAT8/15,(3431,0,24050,1


32/48

A a'/ous' insu' its p'is's aainst' an natual alait& o a +alu' o Rs.1.25 o'. oas liailit& o+'a',s'paat' insuan's o iss o ' an

ula& o Rs. 12 o' 'a/ '' ta'n too+' t/' oos 'pt at an& ti'. /'opan& too an u'lla insuan' o Rs.15 o' also. /' a'/ous' as

opl't'l& 'sto&' in '. /' 'ist''+alu' o oos at t/at ti' as Rs. 30 o'./at insuan' an ' s'ttl' in t/'$opan&s lai


33/48

Iil to the +arehouse and Rs. 23.25 crore towards liabilitproportionatel to clients

() Rs. 1.25 o' to t/' a'/ous' an Rs. 19.8 o'toas liailit& popotionat'l& to li'nts

() Rs. 1.25 o' to t/' a'/ous', Rs. 12 o'(a.) toas liailit& o p'is/al' oos o li'nts,an Rs. 15 o' (a.) toas liailit&popotionat'l& to ot/'s

() Rs. 1.25 o' to t/' a'/ous' an Rs. 27 o'toas liailit& popotionat'l& to li'nts

(') ot Att'pt'

$o't Ans' : Rs. 1.25 o' to t/' a'/ous' anRs. 27 o' toas liailit& popotionat'l& to li'nts


34/48

2 A clientSs 20 ear mone back polic of sumassured rs 2 lakh has annual premium of rs1!2, olic pas back 20" of s.a after each of-rst three 5(ears sur#i#al periods and another

40" of s.a on sur#i#ing full term. The client hasrecei#ed the third mone back. ou estimate thegross returns presentl in the polic consideringre#ersionar bonus of rs 50 per thousands s.a.

ou compare the cost beni-t if the client pas allpremiums and sur#i#es the polic and also gets rs150 per thousand s.a as loalt bonus. ouconclude that 666666666.


35/48

athe o#erall return impro#es marginall b1.15" p.a

bthe additional in Fow on 5 future premiums

would amount to o#er 19" p.a returns c the additional in Fow on 5 future premiums

would amount to nearl !0" p.a returns

d the additional in Fow on 5 future premiums

less opportunit cost would amount to nearl12" p.a


36/48

The earning member of a familaged !5 ears e$pects to earn tillne$t 25 ears. ;e e$pects an annualgrowth of 3" in her e$isting netincome of Rs. 5 lakh p.a. @f he

considers an a#erage in#estmentield of " till his life e$pectanc of30 ears, what economic #alue could

be ascribed to his life toda%


37/48

Solution:

&urrent net income 500,000 Rs. p.a.

Rate of increase of net income 3" p.a.

@n#estment ield from in#esting " p.a.

Iumber of ears the incme is e$pected to

continue25 ears 8conomic #alue 15,35,2 Rs.

B//1"7/13"(1,25,(500000,0,1


38/48

A retiree of age 0 wants to enter into there#erse mortgage scheme b mortgaging hisself(occupied house which is #alued at Rs. 30lakh. An appro#ed lending institution agreesto pro#ide periodic monthl paments underthe scheme considering a loan to #alue ratioof 30" and at a rate of interest of 1!.5" p.a.@f the retiree opts for a 15(ear term ofre#erse mortage, what -$ed periodic monthlpaments he stands to recei#e under thescheme%


39/48

Solution:

Balue of ;ouse 3,000,000 Rs.

Doan 8ligible ,400,000 Rs. 3000000*30"

Rate of @nterest 1!.5" p.a. Term 15 ears

130 months

;ont/l& pa&'nts un' '+'s'ota'10,703 Rs.;(13.75%"12,180,0,-6400000,1)


40/48

A retiree of age 5 has -$ed pension of Rs. 15,000 permonth. ;is household e$penses ha#e e$ceeded his pensionof late and are Rs. 1,000 per month now. ;e hasapproached an appro#ed lending institution under Re#erse:ortgage cheme. ;e is oered -$ed monthl paments

for 15 ears at a rate of interest of 1!.5" on Rs. 4 lakheligible #alue of his home. ;e meets his annual e$pensesas increased b " inFation e#er ear and in#ests thee$cess amount from his two -$ed annuities, -$ed pensionand re#erse mortgage stream, in an in#estment ielding

10" p.a. at the end of e#er ear starting from this earonwards. ou assess at the end of -#e ears thusaccumulated fund against the total liabilit under Re#erse:ortgage and -nd that 666666.


41/48

Alternative Method fo nding accumulated fund:

BG


42/48

An annuit product is designed insuch a wa that it gi#es -rst cashFow at " of the corpus at the end

of -rst ear and thereafter e#erear in the form of growing annuitat the rate of 5". @f the cash Fows

are guaranteed for 15 ears, whatrate of return is obtained on thecorpus in#ested%


43/48

Solution:

uppose the corpus in#ested isG 100 Rs.

&ash Fow at the end of -rst ear Rs.

?rowth in annuit in e#er subse'uent ear 5.00"p.a.

?uaranteed period of annuit 15 ears

/( &orpus in#ested /100

&ash Fow ear 1

&ash Fow ear 2 .!0

&ash Fow ear ! .2

&ash Fow ear 4 .95

&ash Fow ear 5 .29

&ash Fow ear .

&ash Fow ear 3.04

&ash Fow ear 3 3.44

&ash Fow ear 9 3.3

&ash Fow ear 109.!1

&ash Fow ear 119. &ash Fow ear 1210.2

&ash Fow ear 1!10.3

&ash Fow ear 1411.!1

&ash Fow ear 1511.33

@RR 3.04%


44/48

A retired person has contracted a 20(ear immediateannuit plan which pro#ides an annual stream ofincome, increasing ear(on(ear at 5". ;e is due torecei#e 5th installment of Rs. 5.50 lakh which is " of

the balance corpus remaining in annuit. ;e wantsthe term of the annuit to increase. ;e estimates thatRs. 4.5 lakh would be sucient for his current li#inge$penses. ;e proposes this to the annuit pro#iderwith other terms remaining as originall agreed. @f the

ield of the annuit is .5" p.a., how man moreinstallments would get added in the restructuredannuit than the original%


45/48

5th cash Fow stream to be recei#ed 550,000 Rs.

" of balance amount "

The outstanding balance of corpus before 5th installment9,1, Rs. 5500007"

Re#ised withdrawal amount of 3th installment 45,000 Rs.

@nterest rate .50" p.a.

?rowth in annuit as agreed 5" p.a.

Eutstanding corpus after paing 5th installment /out of 203,91, Rs. 91(45000

Iumber of ears the corpus to last beginning th install. 21.!

Rs. I8R/1.0571.05(1,45000*1.05,(391*1.05,0,1 Total installments including alread 3 disbursed 2.! 521.!

@ncrease in installments 6.36 install'nts 26.36-20

a'


46/48

A retired couple has -$ed pension of Rs. !0,000 p.m.while their current li#ing e$penses are at !1,000 p.m.The sta in their own house. ou ad#ise them to a#aila loan under re#erse mortgage which is an eligible

lump sum of Rs. 40 lakh for 15 ears at 12.5" p.a.interest. The annual interest is calculated after e#er12 months on the pre(standing balance and added tothe outstanding loan amount. ou in#est the a#ailableamount after withholding the e$cess normal e$penses

for the -rst ear and considering " inFation thereafterat the beginning of e#er ear. @f the in#estment ieldis 9" p.a., b what amount outstanding loan woulde$ceed in#estment after 3 ears%


47/48

Doan outstanding at the end of 3ears 10,2!,1!3 Rs.4000000*/112.5"C3


48/48

&urrent annual e$penses !2,000 !1000*12

B of " escalataing e$penses discounted at 9" for 3ears /2,04,50 B/1.0971.0(1,3,!2000,0,1

B of -$ed pension discounted at 9" for 3 ears

/2,11,3! B/9",3,!0000*12,0,1 B of additional e$penses reco#ered from R: loan

disbursed 5!2,0 20450(2113!

Kalance loan amount to be in#ested for 3 ears at 9" p.a.!,4,29! 4000000(5!20

Accumulated #alue after 3 ears ,903,93!429!*/19"C3

hortfall in #alue accumulated from loan liabilit/!,!54,!40 90393(102!1!3

2.1.a fpsb numericals

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