A household with wealth but limited ready cash
Series X-A case study · set 1, case 1 of 9 · 5 questions · 1 mark each
Question 1 of 5Case practice
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Ananya and Kabir receive monthly take-home income of ₹1,20,000. Their essential living costs are ₹48,000, discretionary spending is ₹12,000, and loan EMIs total ₹25,000. These are all monthly outflows before savings. They own a home worth ₹70 lakh, investments worth ₹8 lakh and a bank balance of ₹2 lakh. Their only liabilities are a home loan of ₹35 lakh and a personal loan of ₹3 lakh. They choose an emergency target of six months of essential costs plus EMIs. Their investments are earmarked for a distant goal and are excluded from their ready emergency cash. All values refer to the same date.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
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The case and its answers
Every question of this case, with its answer and why each other option is wrong.
Ananya and Kabir receive monthly take-home income of ₹1,20,000. Their essential living costs are ₹48,000, discretionary spending is ₹12,000, and loan EMIs total ₹25,000. These are all monthly outflows before savings. They own a home worth ₹70 lakh, investments worth ₹8 lakh and a bank balance of ₹2 lakh. Their only liabilities are a home loan of ₹35 lakh and a personal loan of ₹3 lakh. They choose an emergency target of six months of essential costs plus EMIs. Their investments are earmarked for a distant goal and are excluded from their ready emergency cash. All values refer to the same date.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
Q1How much monthly cash is available for saving before any new commitment?
Option A. ₹35,000 — Correct answer
Option B. ₹10,000
Why it is wrong: This subtracts the EMIs twice.
Option C. ₹47,000
Why it is wrong: This omits discretionary spending.
Option D. ₹60,000
Why it is wrong: This omits the loan EMIs.
Answer: A. ₹1,20,000 − ₹48,000 − ₹12,000 − ₹25,000 = ₹35,000. This is the cash surplus before a new savings instruction. Remember: A budget surplus is income less all included expenses.
Hint, shown before you answer in practice mode: Subtract every listed monthly outflow once.
XA-S1-C01-Q1easynumerical
Q2What is their net worth on the stated date?
Option A. ₹38 lakh
Why it is wrong: This is total liabilities.
Option B. ₹45 lakh
Why it is wrong: This omits the personal loan.
Option C. ₹80 lakh
Why it is wrong: This is total assets before liabilities.
Option D. ₹42 lakh — Correct answer
Answer: D. Assets are ₹70 + ₹8 + ₹2 = ₹80 lakh. Liabilities are ₹35 + ₹3 = ₹38 lakh. Net worth is ₹42 lakh. Remember: Net worth includes debts even when instalments appear in the monthly budget.
Hint, shown before you answer in practice mode: Add all assets, then subtract both loans.
XA-S1-C01-Q2mediumnumerical
Q3Under their chosen rule, how large is the emergency target?
Option A. ₹2.88 lakh
Why it is wrong: This excludes the EMIs from the chosen rule.
Option B. ₹4.38 lakh — Correct answer
Option C. ₹5.10 lakh
Why it is wrong: This includes discretionary spending, contrary to their rule.
Option D. ₹7.20 lakh
Why it is wrong: This uses six months of income instead of expenses.
Answer: B. The target is six × (₹48,000 + ₹25,000) = ₹4,38,000, or ₹4.38 lakh. Remember: An emergency-fund rule must specify which expenses it covers.
Hint, shown before you answer in practice mode: The chosen monthly base is essential costs plus EMIs.
XA-S1-C01-Q3mediumnumerical
Q4How much more ready cash is needed to meet that emergency target?
Option A. ₹4.38 lakh
Why it is wrong: This ignores the bank balance already available.
Option B. ₹0
Why it is wrong: The distant-goal investments were excluded from emergency cash.
Option C. ₹2.38 lakh — Correct answer
Option D. ₹2.88 lakh
Why it is wrong: This does not subtract available cash from the correct target.
Answer: C. ₹4.38 lakh − ₹2 lakh = ₹2.38 lakh. The earmarked investments are not counted under the case instruction. Remember: A funding gap is the target less eligible existing resources.
Hint, shown before you answer in practice mode: Compare the target with the ₹2 lakh bank balance.
XA-S1-C01-Q4mediumnumerical
Q5They can set aside the whole monthly surplus for this gap. With no return or withdrawals, after how many complete months is the target first reached?
Option A. 5 months
Why it is wrong: Five deposits total ₹1.75 lakh.
Option B. 8 months
Why it is wrong: The target is already reached after seven deposits.
Option C. 7 months — Correct answer
Option D. 6 months
Why it is wrong: Six deposits total ₹2.10 lakh, below the ₹2.38 lakh gap.
Answer: C. ₹2,38,000 ÷ ₹35,000 = 6.8. Six months are insufficient. Seven deposits provide ₹2,45,000. Remember: When a target must be fully funded, fractional months require rounding upward.
Hint, shown before you answer in practice mode: Round the gap divided by the monthly surplus up to the next full month.
XA-S1-C01-Q5hardnumerical
Funding a dated education goal
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