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PF Questions(Orderered) (1)

The document presents a series of financial questions regarding retirement planning, savings, and investment strategies for different individuals with varying financial goals and time horizons. Each question involves calculating future financial needs based on current expenses, inflation rates, and investment returns. The scenarios include maintaining living standards post-retirement, saving for education, and determining appropriate sinking fund contributions for asset replacement.

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Ankit Tayal
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6 views2 pages

PF Questions(Orderered) (1)

The document presents a series of financial questions regarding retirement planning, savings, and investment strategies for different individuals with varying financial goals and time horizons. Each question involves calculating future financial needs based on current expenses, inflation rates, and investment returns. The scenarios include maintaining living standards post-retirement, saving for education, and determining appropriate sinking fund contributions for asset replacement.

Uploaded by

Ankit Tayal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Question 1:

Mr. Saha, who has been working with a multinational company for the last 15 years, is 45 years old and
spends Rs. 5,40,000 annually to maintain his living standard. He wants to maintain the same standard of
living even after retirement. Inflation is @ 5% for the whole 15-year period, and even though there will be an
increase in the price of goods and services, he would not like to compromise on his living standard. What
amount will be required annually when he retires at age 60?

Question 2:

Miss Monica spends Rs. 2,40,000 p.a. and she wishes to increase her living standard by 3% every year as
she is optimistic about the growth in her career. She is 30 years old, and inflation is assumed to be 4.5% for
a 30-year period. How much money per annum will she require at age 60?

Question 3:

Mr. Rajan spends Rs. 3,60,000 per annum to meet his annual living costs. He wishes to maintain the same
standard of living after retirement which will be after 15 years. Inflation in the first 5 years is 5% p.a., in the
next 5 years it will be 4.5%, while in the following 5 years it will be 5.5% p.a. Mr. Rajan feels that at the age
of 60 most of his commitments such as children's education and marriage will be fulfilled, and therefore he
requires only 75% of the expenses from age 60 onwards. How much money will Mr. Rajan require at the
age of 60?

Question 4:

Sudha needs Rs. 5,25,000 after 5 years and Rs. 10,00,000 after 12 years to meet two goals of buying a car
and a house. The rest of the money required to buy a house will be financed by her employer. She has a
long-term horizon and can therefore invest in equity, which will provide her a 15% return on her
investments. What is the lump sum amount she should invest now in order to meet her two goals at the
appropriate time?

Question 5:

In 10 years, a machine costing Rs. 40,000 will have a salvage value of Rs. 4,000. A new machine at that
time is expected to sell for Rs. 52,000. In order to provide funds for the difference between the replacement
cost and the salvage cost, a sinking fund is set up into which equal payments are placed at the end of each
year. If the fund earns interest at the rate of 7% compounded annually, how much should each payment
be?

Question 6:

If you need Rs. 20,000 for your daughter's education, how much must you set aside each quarter for 10
years to accumulate this amount at the rate of 6% compounded quarterly?

Question 7:

To save for a child's education, a sinking fund is created to have Rs. 1,00,000 at the end of 25 years. How
much money should be retained out of the profit each year for the sinking fund if the investment can earn
interest at the rate of 4% per annum?
Question 8:

A machine costs Rs. 1,00,000 and its effective life is estimated to be 12 years. A sinking fund is created for
replacing the machine by a new model at the end of its lifetime when its scrap realizes a sum of Rs. 5,000
only. Find what amount should be set aside at the end of each year, out of the profits, for the sinking fund if
it accumulates at 5% effective.

Question 9:

Suppose a machine costing Rs. 50,000 is to be replaced at the end of 10 years; at that time it will have a
salvage value of Rs. 5,000. In order to provide money at that time for a machine costing the same amount,
a sinking fund is set up. The amount in the fund at that time is to be the difference between the replacement
cost and salvage value. If equal payments are placed in the fund at the end of each quarter and the fund
earns 8% compounded quarterly, what should each payment be?

Question 10:

Sneha gets a bonus from her employer every year in the month of April. She invests this money in equity
mutual fund schemes. She has already accumulated Rs. 11,00,000, and the average rate of return on these
investments has been 15% p.a. This year she invested Rs. 2,00,000 in the same type of schemes, which
pay her a 15% rate of return. Next year she will invest Rs. 3,00,000. How much money will she have in her
account after 10 years if she does not invest after that?

Question 11:

Gautam has Rs. 3,00,000 to invest and he wishes to make this money grow to Rs. 6,03,407.15 in 5 years.
He has the following options available to him, and he is a moderate risk taker:

● RBI (taxable) bonds: 8%


● Debt funds of mutual funds: 9%
● Balanced funds: 12%
● Diversified equity funds: 15%
● Direct equity: 18%

Which instrument should he choose to meet his target of accumulating Rs. 6.034 lakh?

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