Business Studies · Financial Management
Mr. Khanna, age 45, has received a 2 Crore inheritance. He is risk-averse but needs to beat inflation (currently 6 percent) to fund his daughter's education in 5 years. His bank manager suggests putting all funds into a 5-year Fixed Deposit at 7 percent interest. Why might a wealth manager criticize this advice?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Because Fixed Deposits are too risky for an inheritance
- 2Because the post-tax return on the FD (assuming 30 percent tax) will be only 4.9 percent, which is below inflation, leading to a loss in purchasing power✓
- 3Because the bank manager is not allowed to sell Fixed Deposits to clients above the age of 40
- 4Because the inheritance should only be spent on luxury goods to stimulate the economy
Correct answer
Because the post-tax return on the FD (assuming 30 percent tax) will be only 4.9 percent, which is below inflation, leading to a loss in purchasing power
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