As an investment advisor, you have been approached by a client called Ramesh, who wants some help
Question:
As an investment advisor, you have been approached by a client called Ramesh, who wants some help in investment-related matters. Ramesh is currently 45 years old and has Rs 6, 00,000 in the bank. He plans to work for 15 more years and retire at the age of 60. Ramesh’s present salary is Rs 4, 00,000 per year. He expects his salary to increase at the rate of 12% per year until his retirement. Ramesh has decided to invest his bank balance and future savings in a portfolio in which stocks and bonds will be equally weighted. Assume that these proportions will be maintained by him throughout. He also believes that bonds will provide a return of 7% and stocks a return of 13%. Once Ramesh retires at the age of 60 he would like to withdraw Rs 5,00,000 per year from his investments for the following 15 years as he expects to live up to the age of 75 years. He also wants to give Rs 10, 00,000 to his children at the end of his life.
How much money would he need 15 years from now?
How much should Ramesh save each year for the next 15 years to be able to meet his investment objectives spelled out?
Assume that the savings will occur at the end of each year.
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett