FLI P
Please click on the particular cell to see the calculation
1
John has a house, whose market value is INR 45 lakh and the insured value is INR 35 lakh. A fire in the house causes a damage of INR 20 lakh. How much can John receive as claim? a.INR 15.6 lakh b.INR 19.4 lakh c.INR 10 lakh d.INR 20 lakh
Solution John would get: [Insured Value/80% of Market Value] x Claim Value Insured Value (in lakhs) Market Value (in lakhs) Claim Value (in lakhs) John would get (in lakhs)
2
The amount of Insurance premium to be charged would depend upon: a.The probability of an event b.The financial loss given the event c.Age of the policy holder d.a & b
Amount of insurance premium to be charged is decided decided basis Solution probability of happning of an event and financial loss provided the event happen.
3
A machine was purchased purchased for INR 50,000 50,000 and insured for the the same amount. Depreciation charged was 15% on original cost for every year. After three years, machine was damaged. Current market value of the machine is INR 34,000.W hat would be the claim amount under an indemnity policy? policy?
35 45 20 19.4
a.INR 27500 b.INR 36125 c.INR 50000 d.INR 34000 Solution Original Cost Depreciation for 3 years Claim amount under indemnity (Original Cost - Depreciation)
4
Which of the following incidents cannot be covered under Commercial Insurance? a.Raju (a fireman employed by JV Ltd.), gets injured (on the job) while rescuing people during a fire breakout. b.Ramesh Shahu died in a flight accident. He was CEO & MD of Fireworks Ltd. and it will be very difficult for the company to find a replacement. c.Rahul, a self employed doctor, met with an accident and will not be able to work for a month. d.Mihir meets with an accident while going for a movie and has to pay INR 10,000 as medical expenses. He works with DB Infra Ltd.
Commercial insurance covers for any loss or damage to a commercial entrprise/activity. Except in Mihir's case the Solution business/commercial activity will be impacted in all other cases. Thus mihir's case will not be covered under commercial insurance.
5
The amount returned to the policy holder on termination is called: a.The Surrender Value b.The Cash Value c.The Cash Value plus dividends d.The Surrender Value plus Surrender Dividends less loans and charges
Solution
6
Surrender Value is the amount returned to the policy holder on termination of the policy.
Under a level premium decreasing structure -
50000 22500 27500
a.Your premium keeps falling over time b.Your premium remains constant but the tenor of the policy is decreasing c.Your premium remains constant,but the cover decreases d.None of the above
Solution
7
Under a level premium policy, premium remains constant, however cover falls as risk increases with time.
Alternate Investments are categorized by the following except: a.Illiquidity b.Longer gestation periods c.Consistently exceptional returns d.None of the above
Alternate investment do not have a liquid market. They do have Solution long gestation periods. None of the investments promise consistently exceptional returns.
8
How much of a corpus does Ravi needs to accum ulate on retirement, to achieve a post retirement income of Rs.40,000 per month. The corpus can be invested at 6% p.a. post retirement? Given:Ravi expects to retire in 25 years and has a life expectancy post retirement of 30 years. Assume inflation rate as 5% p.a. a.INR 2,40,903 b.INR 66,71,665 c.INR 7,20,000 d.INR 2,00,903
We need to compute the retirement corpus which Ravi will invest after 25 years to get a steady income of INR 40,000/month for a period of 30 years (these 30 years will be post-retirement). Retirement corpus here will simply present value of annuity, which we can compute using the formula below: Solution
RC = (A (1+i)^t - 1)/(i*(1+i)^t) Where, RC = Retirement Corpus A = Annuity i.e. INR 40,000 i = Interest rate/month = .06/12 =.005 t = time periods = 30*12 = 360 After putting the above values in the formula, you get a retirement corpus of INR 66,71,665
9
Nishant is planning to save INR 100,000 at the end of each year, after he turns 30, and until he reaches 60. Calculate his retirement corpus. Assume that the rate of return is 10%. a.INR 1,64,49,402 b.INR 10,00,000 c.INR 19,83,740 d.INR 16,44,940 Here, Nishant is planning to invest INR 1,00,000 each year for 30 years. We need to find future value of this annuity@10% to arrive at retirement corpus. FV(A) = A*((1+i)^n-1/I)
Solution Here - FV(A) = Retirement corpus? A = annuity amount = INR 100000 I = rate of interest = .10 n = time period = 30 Putting the above values in the formula will give you a retirement corpus of INR 1,64,49,402
10
Ravi expects to retire in 30 years. He currently spends INR 40,000 p.m. Assuming an inflation rate of 6% p.a., how much will Ravi spend post retirement?
a.INR 2,00,903 b.INR 7,20,000 c.INR 66,71,665 d.INR 2,40,903
Solution
We will have to calculate future value of Ravi's monthly expenditure by adjusting it for inflation. Monthly Inflation Rate Ravi will spend post-retirement
0.005 240903
David has a traditional insurance policy since the last 3 years. He has paid a premium of INR 50,000 every year. He is in urgent need of money, so he wants to surrender his insurance policy. How much money will David get? 11
a. Amount deducted through for risk cover by insurance company (out of premium paid) every year = INR 10,000 b. Loan taken by David at the end of 2nd year = INR 25,000 c. In last 3 years, income earned on investments of premium =INR 6,000 d. Surrender charges = INR 5,000 a.INR 91,000 b.INR 69,000 c.INR 71,000 d.INR 96,000
Solution Total amount paid in 3 years Amount deducted for risk cover Amount actually invested Income earned on investment Cash value of the policy Outstanding loan Surrender charges David will get (Surrender Value)
12
Samar has a life insurance policy. He received INR 500,000 after the term of the policy. Which type of insurance policy is it? a.Level Term Insurance b.Decreasing Term Insurance c.Renewable Term Insurance
150000 30000 120000 6000 126000 25000 5000 96000
d.None of the above
In a term insurance policy, amount is received only in case of death. Solution Since samar has received the policy amount on maturity, it can't be a term insurance policy.
13
Rashmi is due to retire and has savings of INR 5,000,000. The rate of return on an investment made today gives 6% p.a. W hat will be the monthly annuity she will receive if her life expectancy is 25 years post retirement?
a.INR 17215 b.INR 28319 c.INR 32215 d.INR 30145
Here, Rashmi has accumulated a retirement corpus of INR 50,00,000. We need to calculate monthly annuity amount this corpus can generate at 6% p.a. for 25 years. RC = (A (1+i)^t - 1)/(i*(1+i)^t) Solution
Where, RC = Retirement Corpus = INR 50,00,000 A = Annuity i = Interest rate/month = .06/12 =.005 t = time periods = 25*12 = 300 Putting the above values in the formula will give us the annuity value of INR 32215
14
A life insurance company has guaranteed a payment of INR 9 Million to a pension fund, 5 years from now. If the Insurance company can invest today at 6.75%, how much must it invest to meet its obligation? a.INR 6.49 mn b.INR 6.8 mn c.INR 12.47 mn
d.INR 5.84 mn Solution We will need to take out the present value of INR 9 million i.e 6.49
P - Wealth Management actice Test 3 - Solution www.learnwithflip.com
