Unit study guide · NISM Series X-A
Introduction to Personal Financial Planning
4 questions in this unit
What this unit covers
- Which statement most clearly specifies a financial goal that an adviser can evaluate for funding?
- A client has ₹8,00,000 in bank deposits, investments worth ₹14,00,000 and a house worth ₹55,00,000. Outstanding housing and vehicle loans are ₹22,00,000 and ₹3,00,000 respectively. Using these current values and outstanding balances, what is the client’s net worth?
- A client initially has cash of ₹10,00,000, other assets of ₹40,00,000 and liabilities of ₹15,00,000. The client buys a car worth ₹8,00,000 using ₹2,00,000 cash and a new ₹6,00,000 loan. Assume the car’s immediate market value equals its price, with no fees or depreciation. What happens to net worth immediately after the purchase?
- A client can currently invest ₹25,000 a month. Under the agreed planning assumptions, funding all stated goals would require ₹40,000 a month. Which is the most appropriate next planning step?
Key ideas
From the practice bank · 1
Which statement most clearly specifies a financial goal that an adviser can evaluate for funding?
C defines the purpose, target amount and horizon sufficiently to begin evaluating funding. Read each statement for a purpose, an amount and a deadline. C supplies a house down payment, ₹12,00,000 and a date five years away. Its wording also states that ₹12,00,000 is the amount payable then, rather than today’s cost. These details allow a funding calculation. They do not prove that the goal is affordable or that any particular investment is suitable. Remember: Specify the goal before choosing how to fund it. Distinguish a future cash requirement from a cost quoted in today’s money.
Hint Common mistake: Applying inflation again to a target already expressly stated as the future amount payable.
X-A-001From the practice bank · 2
A client has ₹8,00,000 in bank deposits, investments worth ₹14,00,000 and a house worth ₹55,00,000. Outstanding housing and vehicle loans are ₹22,00,000 and ₹3,00,000 respectively. Using these current values and outstanding balances, what is the client’s net worth?
₹52,00,000 is the residual asset value after both outstanding loans are deducted. Add current assets: ₹8,00,000 + ₹14,00,000 + ₹55,00,000 = ₹77,00,000. Add the unpaid loan balances: ₹22,00,000 + ₹3,00,000 = ₹25,00,000. Subtract liabilities once: ₹77,00,000 − ₹25,00,000 = ₹52,00,000. Include the house as an asset and its loan separately as a liability. Remember: A financed asset is not excluded from the balance sheet. Record both its current value and its outstanding debt without double counting.
Hint Common mistake: Deducting a loan from an asset first and then deducting the same loan again from total assets.
X-A-002From the practice bank · 3
A client initially has cash of ₹10,00,000, other assets of ₹40,00,000 and liabilities of ₹15,00,000. The client buys a car worth ₹8,00,000 using ₹2,00,000 cash and a new ₹6,00,000 loan. Assume the car’s immediate market value equals its price, with no fees or depreciation. What happens to net worth immediately after the purchase?
The before-and-after calculations both give ₹35,00,000. Before purchase: assets are ₹10,00,000 + ₹40,00,000 = ₹50,00,000. Net worth is ₹50,00,000 − ₹15,00,000 = ₹35,00,000. After purchase: cash falls to ₹8,00,000, other assets remain ₹40,00,000 and the car adds ₹8,00,000. Total assets become ₹56,00,000. Liabilities increase by ₹6,00,000 to ₹21,00,000. Net worth remains ₹56,00,000 − ₹21,00,000 = ₹35,00,000. Remember: An equal-value asset exchange does not itself create wealth. Fees, overpayment or immediate depreciation would change the result, but are expressly excluded.
Hint Common mistake: Following only the change in cash or only the change in debt rather than both sides of the balance sheet.
X-A-003From the practice bank · 4
A client can currently invest ₹25,000 a month. Under the agreed planning assumptions, funding all stated goals would require ₹40,000 a month. Which is the most appropriate next planning step?
This addresses the actual constraint and includes the client in choosing the trade-offs. Required contribution is ₹40,000 per month. Available contribution is ₹25,000. The monthly funding gap is ₹15,000. The next step is to discuss which goals matter most and whether target amounts, dates or the surplus can realistically change. Only after agreeing feasible changes should the adviser reassess investments and risk. The question does not identify any specific goal as the one to cut. Remember: Adjust resources or goals transparently rather than making an unfunded plan appear feasible through optimistic return assumptions.
Hint Common mistake: Treating a forecast return as certain funding or recommending borrowing without evaluating the new repayment burden.
X-A-004