Archive / Investment Adviser (Level 2) / Miscellaneous Aspects of Retirement Planning

nism-series-xb-remaining-corpus-after-goal-payouts[ INVESTMENT ADVISER (LEVEL 2) ]

Mr. Y starts with a corpus of Rs. 2,00,00,000 earning 8% p.a. He pays the actual escalated education costs directly from the corpus (Rs. 30,17,036 at end of Year 5; Rs. 34,69,591 at end of Year 6) and marriage cost (Rs. 1,94,87,171 at end of Year 7). How much capital remains in the corpus at the end of Year 7?

[ A ]Rs. 66,42,292

[ B ]Rs. 75,23,085[ CORRECT ]

[ C ]Rs. 69,65,820

[ D ]Rs. 81,24,932

Takeaway

After crediting 8% annual interest and paying the escalated education and marriage costs from the corpus over Years 5-7, Rs. 75,23,085 remains at the end of Year 7, so option B is correct.

Derivation

Tracking the corpus year by year: Year 4 closing = Rs. 2,72,09,779.20. Year 5: (2,72,09,779.20 x 1.08) - 30,17,035.78 = Rs. 2,63,69,525.75. Year 6: (2,63,69,525.75 x 1.08) - 34,69,591.15 = Rs. 2,50,09,496.67. Year 7: (2,50,09,496.67 x 1.08) - 1,94,87,171.00 = Rs. 2,70,10,256.40 - Rs. 1,94,87,171.00 = Rs. 75,23,085.40. This tests whether a candidate can maintain a running balance-sheet roll-forward — crediting interest on the full opening balance each year before subtracting that year's specific outflow — rather than netting cashflows in the wrong order.

Why the others fail

A — Rs. 66,42,292

Results from failing to credit the full year's 8% interest in one or more years of the roll-forward, understating the compounding benefit before each outflow.

C — Rs. 69,65,820

Assumes the Rs. 62.90 Lakhs education fund set aside at Year 5 was permanently carved out into a separate 6% account, rather than staying in the main 8% corpus.

D — Rs. 81,24,932

Under-deducts the Year 5 and Year 6 education outflows from the running balance, leaving an inflated closing figure that overstates the true remaining corpus.