Archive / Investment Adviser (Level 2) / Miscellaneous Aspects of Retirement Planning
nism-series-xb-corpus-closing-balance-year-3-no-outflows[ INVESTMENT ADVISER (LEVEL 2) ]
In Case 2, Mr. Y's Rs. 2,00,00,000 corpus grows at 8% p.a. with no outflows during the first 3 years. What is the exact closing balance at the end of Year 3?
[ A ]Rs. 2,51,94,240[ CORRECT ]
[ B ]Rs. 2,16,00,000
[ C ]Rs. 2,33,28,000
[ D ]Rs. 2,72,09,779
Takeaway
With no outflows in the first three years, Mr. Y's Rs. 2,00,00,000 corpus compounding at 8% p.a. closes Year 3 at exactly Rs. 2,51,94,240, so option A is correct.
Derivation
Y1 = Rs. 2,00,00,000 x 1.08 = Rs. 2,16,00,000. Y2 = Rs. 2,16,00,000 x 1.08 = Rs. 2,33,28,000. Y3 = Rs. 2,33,28,000 x 1.08 = Rs. 2,51,94,240. This tests sequential year-by-year compounding rather than a direct exponent shortcut, checking that candidates can build (or verify) a running balance one year at a time — a skill directly relevant to the larger balance-tracking tables used throughout Mr. Y's case once outflows begin from Year 5 onward.
Why the others fail
B — Rs. 2,16,00,000
This is the balance at the end of Year 1 only, three years short of the requested Year 3 closing balance.
C — Rs. 2,33,28,000
This is the balance at the end of Year 2 only, one year short of the requested Year 3 closing balance.
D — Rs. 2,72,09,779
This is the balance at the end of Year 4, one year beyond the requested Year 3 closing balance, after an additional year of 8% compounding.
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