Question Number 1: Total marks for this Question = 16 marks a) Identify and briefly discuss the principal demographic factors that have contributed towards many developed countries, including Australia, facing a rapidly ageing population (word limit, 150). (5 marks) b) The short history of financial planning contains a range of issues that led to the creation of the ‘new profession’ of financial planning. Financial planners and investors can learn a number of lessons from the recent history of financial planning; identify five such lessons and illustrate with an example where appropriate (word limit, 150). (6 marks) c) Comment on whether you consider the current government superannuation contribution requirements to be adequate to provide for a suitable retirement income for the Australian population (word limit, 150). (5 marks) Question Number 2 : Total marks for this Question = 16 marks Andrew Hall is a fisherman who has a fleet of boats that are used for his day-to-day fishing business. Apart from his livelihood, Andrew enjoys fishing as a hobby and plans to buy a motor boat for recreational purposes. He has researched the current market prices and found his preferred model will cost him around $82,500. He expects to finance the boat through a bank loan. The following three banks have offered him the required amount under different terms and conditions: Option 1 – CommBank offers the loan with $225 weekly repayments over 9 years with the payments occurring at the beginning of each week. Option 2 – PackWest Bank offers the loan with repayments of $495 at the beginning of each fortnight over 8 years. In addition, this bank charges an upfront loan initiation fee of $850. Option 3 – NZN Bank offers the loan with repayments of $765 at the end of each month over 12 years with a loan establishment fee of $250 payable upon acceptance of the loan. As Andrew has become confused as to which finance alternative is best, given the different terms and conditions of each financier, he has sought your assistance and advice. Required a) On what financial basis should Andrew seek to differentiate and select between the different financiers? (3 marks) b) With the assistance of a financial calculator and your previous discussion in part a) of this question, advise Andrew as to the preferred finance alternative. (13 marks) Note: Show all workings and state any assumptions that you have made.
Question Number 3 (Total marks for this Question = 28 marks) Just after graduation, you have joined ABC Financial Advisors as a Paraplanner. Your first job is to prepare basic financial statements and analyse the financial situation of a client. The prepared Fact Sheet is based on information provided by the client and reveals the following information: The client, Ms Rae Adams, is employed as a Management Trainee at YZ Manufacturing. Her gross salary for the 2016 financial year was $61,500. In addition, the employer contributes 9.25% of her gross salary into a personal superannuation fund. Ms Adams’ total tax liability for 2016 was $11,411. In addition, she received non-taxable rental income of $150 and tax-free interest income of $110. Ms Adams has contributed $4,200 to her personal superannuation account. She paid union fees of 1% of her gross salary and $900 in healthcare expenses. Ms. Adams’ household and entertainment expenses were $10,250 and $7,500 in 2016, respectively. Also, Ms Adams paid $13,700 against her mortgage loan and another $9,000 for a credit card loan. Ms Adams owns her home which is worth $525,000. A month ago, her contents were valued by her insurer for $100,000. Furthermore, she has a car worth $21,000 and a savings account balance of $6,000. Her accumulated superannuation balance as of the end of 2016 was $145,000. The outstanding balances on her mortgage loan and credit card were $325,000 and $15,000, respectively. Required a) Using the above financial data, prepare the following information for Ms Rae Adams: i. personal balance sheet; (6 marks) ii. personal cash flow statement; (10 marks) iii. Net Worth Ratio; (2 mark) iv. Quick Ratio; (2 mark) v. Savings Ratio; (2 marks) vi. Debt Service Ratio. (2 marks) b) Comment on the financial situation of the client using the completed financial statements and the ratios (approx. 300 words). (4 marks) Show all workings and state any assumptions that you have made. Total Marks for Assignment = 60
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