NISM Series X-B Chapter 18: Risk Profiling for Investors Practice Questions

Question 1

Adil wants to ensure his spouse can cover household expenses of Rs. 25,000 per month for 30 years, leave a corpus of Rs. 10 lakhs for his child, and cover an outstanding home loan of Rs. 30 lakhs. Inflation is 6% and investment returns are 8%. If he has existing life insurance of Rs. 50 lakhs, how much additional life insurance does he need?

Accepted Answer

Rs. 58 lakhs. 1. Annual expense = Rs. 25,000 * 12 = Rs. 3,00,000.
2. Inflation adjusted return = [(1 + 8%) / (1 + 6%) - 1] = 1.89%.
3. Corpus required for expenses (A) = PV(1.89%, 30, -3,00,000) = Rs. 68,24,711.97.
4. Loan outstanding (B) = Rs. 30,00,000.
5. Child's corpus (C) = Rs. 10,00,000.
6. Total requirement (D) = A + B + C = Rs. 68,24,711.97 + Rs. 30,00,000 + Rs. 10,00,000 = Rs. 1,08,24,711.97.
7. Existing life insurance (E) = Rs. 50,00,000.
8. Additional life insurance required (F) = D - E = Rs. 1,08,24,711.97 - Rs. 50,00,000 = Rs. 58,24,711.97, which is approximately Rs. 58 lakhs

Question 2

Charu, aged 40, earns a monthly income of Rs. 60,000 and expects to work till age 60. She wants to ensure her family has this income for her working life in case of her demise. Assuming an inflation rate of 5% and long-term investment returns of 9%, and an existing life insurance cover of Rs. 30 lakhs, how much additional life insurance should she take?

Accepted Answer

Rs. 72.34 lakhs. 1. Current Annual Income: Rs. 60,000/month * 12 months = Rs. 7,20,000
2. Years of employment left: 60 - 40 = 20 years
3. Inflation adjusted returns (Real Return): [(1 + Investment Return) / (1 + Inflation Rate) - 1]
   Real Return = [(1 + 0.09) / (1 + 0.05) - 1] = [1.09 / 1.05 - 1] = [1.038095238 - 1] = 0.038095238 or 3.8095%
4. Corpus required (Present Value of future income stream): Using the PV function (PV(Rate,Nper,Pmt))
   PV(3.8095%, 20, -720000) = Rs. 1,02,34,443.34 (approximately)
5. Existing insurance cover: Rs. 30,00,000
6. Additional insurance required: Corpus Required - Existing Insurance Cover
   Rs. 1,02,34,443.34 - Rs. 30,00,000 = Rs. 72,34,443.34
Therefore, additional life insurance required is approximately Rs. 72.34 lakhs

Question 3

Mr. and Mrs. Gupta, after becoming persons resident in India, have existing life insurance policies taken in the USA which will payout USD 1 million each if any of them dies in the next 15 years. Which of the following statements regarding these policies is TRUE?

Accepted Answer

They need not buy fresh life insurance policies in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.. Under current regulations (FEMA), Resident Indians are generally permitted to continue holding and paying premiums for life insurance policies taken when they were Non-Resident Indians (NRIs). Premiums can be paid from NRE/NRO accounts, or through legitimate remittances from India, or from income generated abroad (like the rental income mentioned in the case). Therefore, options suggesting they *must* buy new policies or cannot remit premiums are incorrect

Question 4

For Goal 1: Fund son’s 2-year Post Graduation education due in 5 years, the current cost of education is Rs. 15,00,000 per year, and the expected rate of inflation is 15% p.a. The cost required in Year 6 (C6) is Rs. 34,69,591.15. If the funds for the Year 2 education cost are to be provisioned in Year 5, assuming a discounting rate of 6% p.a., what amount of funds is required in Year 5 for the Year 2 cost?

Accepted Answer

Rs. 32,73,199.20. The text states: 'Fund required after 6 years to meet the cost of education of year 2 is Rs. 34,69,591.15'. To find the fund required after 5 years for this cost, we discount it by 1 year at 6% p.a. 
PV = FV / (1 + r)^n 
PV = Rs. 34,69,591.15 / (1 + 0.06)^1 
PV = Rs. 34,69,591.15 / 1.06 
PV = Rs. 32,73,199.20.
This is explicitly stated in the text as '[B] PV(6%,1,,-34,69,591.15)'

Question 5

Mr. Smart, a 60-year-old retiree, has a corpus of Rs. 40 lakhs after tax. It has been determined that the amount required to compensate for the inflation adjustment shortfall in his pension, based on a discounting rate of 5% p.a., is higher than this Rs. 40 lakhs. According to the provided text, what does this imply for the couple's ability to meet their expense requirements?

Accepted Answer

The couple can meet the expense requirements provided the corpus of Rs. 40 lakhs earns @9.90% p.a.. As per Case 4, question 2 in the provided text, the specific implication is stated as: 'The couple can meet the expense requirements provided the corpus of Rs. 40 lakhs earns @9.90% p.a.' This indicates that while the current corpus is insufficient at a 5% return, a higher investment return (9.90%) would make it sufficient

Question 6

Mr. and Mrs. Gupta have substantial life insurance policies taken in the USA. Upon their return to India and becoming residents, what is the most accurate statement regarding their existing US life insurance policies?

Accepted Answer

They can continue their existing US life insurance policies and pay premiums either from their US rental income or by remitting funds from India.. The text for Case 3, question 3, states: 'They need not buy fresh life Insurance policy in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.' This confirms that existing foreign policies can be maintained, and premiums can be paid through permitted channels

Question 7

Adil wants to ensure his spouse can cover household expenses that currently amount to Rs. 25,000 per month, even in the event of his death. He wants to make this provision for 30 years. Apart from household expenses, he wants to leave a corpus of Rs. 10 lakhs for his child's requirements. He also has an outstanding home loan of Rs. 30 lakhs. He has a life insurance of Rs. 50 lakhs. If inflation is assumed at 6% and investment returns at 8%, how much additional life insurance should he take to meet these requirements?

Accepted Answer

Rs. 58 lakhs. 1. Annual expense: Rs. 25,000 * 12 = Rs. 3,00,000
2. Inflation adjusted return: ((1 + 8%) / (1 + 6%)) - 1 = (1.08 / 1.06) - 1 = 1.89%
3. Corpus required to provide income for expenses (A): Using PV function (Rate, Nper, Pmt) = PV(1.89%, 30, -300000) = Rs. 68,24,711.97
4. Loan outstanding (B): Rs. 30,00,000
5. Child's corpus (C): Rs. 10,00,000
6. Total funds required (A+B+C): Rs. 68,24,711.97 + Rs. 30,00,000 + Rs. 10,00,000 = Rs. 1,08,24,711.97
7. Existing life insurance (E): Rs. 50,00,000
8. Additional life insurance required (Total - Existing): Rs. 1,08,24,711.97 - Rs. 50,00,000 = Rs. 58,24,711.97 (approximately Rs. 58 lakhs)

Question 8

Based on Goal 1, what is the total amount of money required in Year 5 to fund the son’s 2-year Post Graduation education, which includes the cost for Year 1 (C5) and the present value of the cost for Year 2 (C6) discounted to Year 5?

Accepted Answer

Rs. 62,90,234.98. As per the 'Calculations as shown in the following tables' for Goal 1:
Fund required after 5 years to meet the cost of education of year 1 (C5) = Rs. 30,17,035.78 [A]
Fund required after 6 years to meet the cost of education of year 2, discounted to Year 5 (PV(6%,1,,-34,69,591.15)) = Rs. 32,73,199.20 [B]
Total amount of money required in Year 5 to fund the cost of education for both years [C] = [A] + [B] = Rs. 30,17,035.78 + Rs. 32,73,199.20 = Rs. 62,90,234.98

Question 9

Mr. C, a 45-year-old single earning member with a good income, is servicing both a home loan and a car loan. He is saving for multiple financial goals, some of which require funding soon. Given these circumstances, which asset allocation strategy would be most suitable for Mr. C?

Accepted Answer

A combination of growth and income-oriented assets, balancing long-term appreciation with the need for stable returns for upcoming goals and liabilities.. Based on Module-end Question 4b, for Mr. C's situation (single earning, loans, immediate and future goals), the suitable assets are 'Primarily growth with some income-oriented assets'. This suggests a balanced approach that combines long-term growth potential with stable returns for impending liabilities and goals, which aligns with option C

Question 10

Mr. and Mrs. Gupta, after returning to India from the USA and becoming residents as per Indian tax laws, have rental income from their property in the USA. Regarding the taxation of this rental income in India, which of the following statements is TRUE?

Accepted Answer

They will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.. The text explicitly states for Case 3, question 1: 'Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.' This is in line with India's tax laws for residents on global income, with provisions for Double Taxation Avoidance Agreements (DTAA)

Question 11

Mr. C is a 45-year-old single earning member of his family with a good income, servicing a home loan and a car loan, and saving for various financial goals, some of which are due for funding now. Based solely on these circumstances, how would you best categorize Mr. C's risk profile?

Accepted Answer

Liquidity seeker. As per Module-end Question 4.a, the given circumstances (servicing loans, goals due for funding now) suggest a strong need for liquidity. The provided solution in the text for this specific question is 'Liquidity seeker'

Question 12

Mr. and Mrs. Gupta have substantial life insurance policies taken in the USA. After returning to India and becoming residents, what is the most appropriate advice regarding their existing US life insurance policies?

Accepted Answer

They need not buy fresh life Insurance policy in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.. As per the text, under Case 3, question 3, the correct statement is: 'They need not buy fresh life Insurance policy in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.' Indian residents are allowed to maintain existing overseas life insurance policies

Question 13

Mr. C, a 45-year-old single earning member with a good income, is servicing a home loan and a car loan while saving for various financial goals, some of which are due soon. Considering his circumstances, which of the following investment strategies would be most suitable for Mr. C?

Accepted Answer

A combination of liquid and income-oriented assets, with some exposure to growth assets for long-term goals.. As per Module 12, Question 4, Mr. C's situation involves: being a single earning member (implies some risk aversion due to sole responsibility), good income (allows for investments), home and car loans (fixed obligations needing stable cash flow), and goals due soon (requiring liquidity). Therefore, a balanced approach is best: liquid assets for immediate goals and emergencies, income-oriented assets for stable returns to meet obligations, and some growth assets for long-term wealth creation. Primarily growth assets (A) would be too risky given his obligations and immediate goals. Primarily liquid assets (B) would compromise long-term growth. Aggressive allocation (D) is unsuitable given the need for stability and imminent goals

Question 14

For Mr. Smart, a 60-year-old retiree, which government scheme offers the highest rate of interest for fixed income investments, subject to its maximum investment limit?

Accepted Answer

Senior Citizen Savings Scheme (SCSS) up to a maximum investment of Rs. 30 lakhs.. As per the 'Answer hint' for Case 4, sub-question no. 3, 'SCSS is the government scheme –and PSU fixed deposit schemes are the respective PSU banks.' The question specifically asks for a government scheme offering the highest rate, and among the choices, SCSS is highlighted in the text's context as a key government scheme for seniors

Question 15

Mr. and Mrs. Gupta, after becoming residents in India as per Indian tax laws, will receive rental income from their property in the USA. Regarding their Indian tax liability for this rental income, which of the following statements is TRUE?

Accepted Answer

They will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.. As per Case 3, question 1 in the provided text, the correct statement is: 'Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.' This implies that as Indian residents, their global income is taxable in India, but provisions for foreign tax credit exist

Question 16

Mr. C, a 45-year-old single earning member of his family, has a good income and is saving for various financial goals, some of which are due soon. He also services a home loan and a car loan. Based solely on these circumstances, how would you best categorize Mr. C's risk profile?

Accepted Answer

Moderate. Mr. C has a good income and is saving for goals, which suggests some capacity for risk. However, his status as a single earning member and having significant liabilities (home loan, car loan) along with near-term goals indicates a need for a balanced approach. A 'Moderate' risk profile would be most suitable, balancing growth with stability and liquidity needs

Question 17

For Goal 1, funding the son’s 2-year Post Graduation education due in 5 years, what is the total amount of money required in Year 5 to fund the education for both years?

Accepted Answer

Rs. 62,90,234.98. As per the 'Goal 1: Fund son’s 2-year Post Graduation education due in 5 years' table, the 'Total amount of money required in Year 5 to fund the cost of education for both years' is explicitly stated as Rs. 62,90,234.98, which is calculated as [A] + [B]

Question 18

Mr. and Mrs. Gupta, after returning to India and becoming resident as per Indian tax laws, have rental income from their house in the USA. Regarding the taxation of this income in India, which of the following statements is TRUE?

Accepted Answer

They will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.. As per Case 3, question 1, option (a) states: 'Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.' This is the correct position for Indian residents with foreign income

Question 19

Mr. and Mrs. Gupta, after returning from the USA and becoming resident in India as per Indian tax laws, will have to pay tax in India on their rental income from a US property. Which of the following statements is TRUE?

Accepted Answer

Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.. As per Indian tax laws, a resident Indian is taxed on their global income. Therefore, rental income from a US property will be taxable in India. However, to avoid double taxation, they will typically receive credit for any tax already paid in the USA on that income, provided a Double Taxation Avoidance Agreement (DTAA) exists between India and the USA. The text implies the existence of such a mechanism by providing option (a)

Question 20

Which MS Excel function is used to calculate the Equated Monthly Installment (EMI) for a loan?

Accepted Answer

PMT. As stated in the 'Module-end Questions' section, 'EMI for a loan can be worked out using the PMT function in MS Excel.'

Question 21

Based on Mr. and Mrs. Gupta's relocation to India, which statement is TRUE regarding their existing life insurance policies taken in the USA?

Accepted Answer

They need not buy fresh life insurance policies in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.. As per the provided text for Case 3, Question 3, statement (c) is explicitly stated as TRUE: 'They need not buy fresh life Insurance policy in India and can either pay the premiums for the existing Life Insurance policy from their rental income in US or remit it from India.'

Question 22

For Goal 1, funding a son's 2-year Post Graduation education, the future cost of education for Year 2 (C6) is Rs. 34,69,591.15. To fund this cost, what amount needs to be invested in Year 5, assuming a discount rate of 6% p.a.?

Accepted Answer

Rs. 32,73,199.20. The text explicitly states this calculation under 'Goal 1: Fund son’s 2-year Post Graduation education due in 5 years': 'Fund required after 6 years to meet the cost of education of year 2 --------------------[B] Rs. 32,73,199.20 PV(6%,1,,-34,69,591.15) [i.e. Rs. 32,73,199.20 invested for 1 year @ 6% p.a. grows to Rs. 34,69,591.15]'. This calculation represents the present value in Year 5 of the expense due in Year 6

Question 23

EMI for a loan can be worked out using the _____ function in MS Excel.

Accepted Answer

PMT. As per the 'Module-end Questions', question 1 directly states that the PMT function in MS Excel is used to work out EMI for a loan

Question 24

Mr. and Mrs. Gupta have returned to India after working in the USA for 20 years. They have given their house in the USA on rent. After they become residents in India as per Indian tax laws, they will have to pay tax in India on their rental income from the US property. Which of the following statements is TRUE?

Accepted Answer

Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.. As per the text, under Case 3, question 1, the correct statement is: 'Yes, they will have to pay tax in India on the rental income from the US property but will get credit for the tax paid in USA.' This is typical under Double Taxation Avoidance Agreements (DTAA) between countries

Question 25

Mr. and Mrs. Gupta have substantial investments in tax-deferred retirement accounts in the USA. Regarding the income accrued on these accounts when they become Indian residents, which of the following statements is TRUE?

Accepted Answer

If the deferred tax retirement account is notified under section 89A of the Income Tax Act then tax in India will also be paid in the year of withdrawal and credit will be available for the tax paid in the US.. As per Case 3, question 2, option (a) states: 'If the deferred tax retirement account is notified under section 89A of the Income Tax Act then tax in India will also be paid in the year of withdrawal and credit will be available for the tax paid in the US.' This specific provision addresses the taxation of foreign retirement accounts for Indian residents

Question 26

Based on the provided data for Goal 1 (funding the son's 2-year Post Graduation education), what is the total amount of money required in Year 5 to fund the education for both years?

Accepted Answer

Rs. 62,90,234.98. As per the text for Goal 1:
Cost of education of Year 1 (C5) = Rs. 30,17,035.78 (This fund is required after 5 years).
Cost of education of Year 2 (C6) = Rs. 34,69,591.15 (This fund is required after 6 years).
To find the total amount required in Year 5, we need the present value of the Year 2 cost (C6) discounted back to Year 5 at 6% p.a.
Fund required after 6 years to meet the cost of education of year 2, when brought back to Year 5 = PV(6%,1,,-34,69,591.15) = Rs. 32,73,199.20.
Total amount of money required in Year 5 = Fund required for Year 1 (C5) + Present Value of Fund required for Year 2 (C6 in Year 5)
= Rs. 30,17,035.78 + Rs. 32,73,199.20 = Rs. 62,90,234.98

Question 27

Which of the following types of asset allocation depends on the market conditions?

Accepted Answer

Tactical asset allocation. Strategic asset allocation is a long-term plan based on the investor's risk tolerance and financial goals, largely independent of short-term market movements. Investor risk profile is specific to the individual. Tactical asset allocation, however, involves short-term adjustments to the strategic asset allocation based on market conditions and economic outlook, aiming to capitalize on perceived market inefficiencies

Question 28

Mr. Smart, a 60-year-old retiree, is looking for fixed income options from government schemes to earn the highest rate of interest. Based on the provided text, which scheme would be advisable for him?

Accepted Answer

Senior Citizen Savings Scheme upto a maximum investment of Rs. 30 lakhs.. The 'Answer hint' for Case 4, sub-question no. 3 explicitly states: 'SCSS is the government scheme'. Among the given options, the Senior Citizen Savings Scheme (SCSS) is a specific government-backed scheme designed for senior citizens, offering competitive interest rates and is highlighted in the text's hint as the relevant government scheme

Question 29

Based on Goal 1 for funding the son’s 2-year Post Graduation education, what is the total amount of money required in Year 5 to fund the cost of education for both years?

Accepted Answer

Rs. 62,90,234.98. As per the 'Funds required for the Goal' section for Goal 1:
Fund required after 5 years to meet the cost of education of year 1 [A] = Rs. 30,17,035.78
Fund required after 6 years to meet the cost of education of year 2 [B] (present valued to Year 5) = Rs. 32,73,199.20
Total amount of money required in Year 5 to fund the cost of education for both years [C] = [A] + [B] = Rs. 30,17,035.78 + Rs. 32,73,199.20 = Rs. 62,90,234.98

Question 30

Adil wants to ensure that his spouse will be able to take care of household expenses that currently amount to Rs.25,000 per month for 30 years, in the event of his death. Additionally, he wants to leave a corpus of Rs.10 lakhs for his child's requirements and cover an outstanding home loan of Rs.30 lakhs. If inflation is 6% and investment returns are 8%, and he already has a life insurance cover of Rs.50 lakhs, how much additional life insurance should he take?

Accepted Answer

Rs.58 lakhs. 1. Annual expense: Rs.25,000 * 12 = Rs.3,00,000
2. Inflation adjusted return: [(1 + Investment Return) / (1 + Inflation Rate)] - 1 = [(1 + 0.08) / (1 + 0.06)] - 1 = 1.0188679 - 1 = 0.0188679 or approximately 1.89%
3. Corpus required for expenses (PV of annuity): Using PV function in Excel: PV(1.89%, 30, -300000) = Rs.68,24,711.97
4. Loan outstanding: Rs.30,00,000
5. Child's corpus: Rs.10,00,000
6. Total financial requirement: Rs.68,24,711.97 (expenses) + Rs.30,00,000 (loan) + Rs.10,00,000 (child's corpus) = Rs.1,08,24,711.97
7. Existing life insurance cover: Rs.50,00,000
8. Additional life insurance required: Rs.1,08,24,711.97 - Rs.50,00,000 = Rs.58,24,711.97 (approximately Rs.58 lakhs)

Question 31

Mr. and Mrs. Gupta, having returned to India from the USA, have employer-provided health insurance valid till year-end, covering hospitalization expenses globally, including India. They can renew it on their own. Regarding their health insurance strategy, which of the following statements is TRUE?

Accepted Answer

It would be advisable to continue the existing health insurance policies and also buy an additional fresh health insurance in India to create a no-claim history.. As per '20.3 Case 3' regarding Mr. and Mrs. Gupta's questions on relocation, the advice given is: 'It would be advisable to continue the existing health insurance policies and also buy an additional fresh health Insurance in India to create a no claim history on a health Insurance policy in India, even if there is an additional cost involved in buying such a policy.' This strategy ensures continuous coverage and establishes a local no-claim history

Question 32

Ms. T invests Rs 60,000 in a 10% yielding asset, using leverage of 1.4 times. Borrowing was at 9% p.a. What was Ms. T’s return on equity?

Accepted Answer

10.4%. 1.  Total Investment (Asset Value) = Rs 60,000
2.  Leverage = 1.4 (meaning Total Investment / Own Funds)
3.  Own Funds (Equity) = Total Investment / Leverage = Rs 60,000 / 1.4 = Rs 42,857.14
4.  Borrowed Funds = Total Investment - Own Funds = Rs 60,000 - Rs 42,857.14 = Rs 17,142.86
5.  Income from asset = Rs 60,000 * 10% = Rs 6,000
6.  Interest paid on borrowed funds = Rs 17,142.86 * 9% = Rs 1,542.86
7.  Net Return (Absolute) = Income from asset - Interest paid = Rs 6,000 - Rs 1,542.86 = Rs 4,457.14
8.  Return on Equity (RoE) = (Net Return / Own Funds) * 100
    RoE = (Rs 4,457.14 / Rs 42,857.14) * 100 = 10.3999% ≈ 10.4%

Question 33

Bose is evaluating an insurance cum investment plan on which he will pay an annual premium of Rs. 6,000 for a sum assured of Rs. 1 lakh. The term of the policy is 20 years and the maturity value is Rs. 2,00,000. A term plan of similar tenor and maturity costs Rs. 150 per Rs. 1 lakh sum insured. What is the return that Bose will earn on the investment portion of the insurance policy?

Accepted Answer

5.3%. 1. Portion of premium which will go to investment: Total premium - Term plan cost = Rs. 6,000 - Rs. 150 = Rs. 5,850.
2. Investment scenario: An annual investment of Rs. 5,850 for 20 years yields a future value of Rs. 2,00,000.
3. Calculate Return (IRR/RATE): Using the RATE function in Excel: RATE(Nper, Pmt, Pv, Fv) = RATE(20, -5850, 0, 200000) = 5.3%

Question 34

Ms. T invested in an asset using leverage. Her total investment in the 10% yielding asset was Rs 60,000, and she used leverage of 1.4 times. What was the amount of her own funds invested?

Accepted Answer

Rs 42,857. As per Module-end Question 3.a:
Total investment = Rs 60,000
Leverage = 1.4 times
Leverage is defined as the ratio of Total Investment to Own Funds.
Therefore, Own Funds = Total Investment / Leverage
Own Funds = Rs 60,000 / 1.4
Own Funds = Rs 42,857.14
Rounding to the nearest whole number, the own funds invested would be Rs 42,857

Question 35

Bose is evaluating an insurance cum investment plan on which he will pay an annual premium of Rs. 6,000 for a sum assured of Rs. 1 lakh. The term of the policy is 20 years and the maturity value is Rs. 2,00,000. A term plan of similar tenor and maturity costs Rs. 150 per Rs. 1 lakh sum insured. What is the return that Bose will earn on the investment portion of the insurance policy?

Accepted Answer

5.3%. As per Practice Case 2 solution:
Annual premium for the insurance cum investment plan = Rs. 6,000.
Cost of a similar term plan for Rs. 1 lakh sum insured = Rs. 150.
Portion of premium allocated to investment = Total premium - Cost of term insurance = Rs. 6,000 - Rs. 150 = Rs. 5,850.
Number of periods (Nper) = 20 years.
Payment (PMT) = -Rs. 5,850 (annual outflow).
Future Value (FV) = Rs. 2,00,000 (maturity value).
Using the RATE function in Excel: RATE(Nper, PMT, PV, FV).
Since there is no initial PV (lump sum investment), PV is 0.
RATE(20, -5850, 0, 200000) = 5.3%

Ch.18: Risk Profiling for Investors

What You Will Learn in This Chapter

Multiple Choice Questions (35)

Case-Based Questions (1 sets)

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