Assignment 1 details

• This assignment covers Topics 1 to 2 and accounts for 25% of your final grade.
• In this assignment, there are four (4) case studies with short-answer questions for each case study. Answer all questions.
• Marks will be awarded for referencing and presentation.
• Your overall mark for this assignment will be rounded to the nearest whole number.
• Refer to the Criteria-Based Marking Guide for guidelines on what is expected for each question.
• Full workings must be shown for all calculations. Show all calculations in the text of your assignment and not attached as an appendix. Appendices to the assignment will not be read.
• Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and resources. The weightings indicate the relative importance of each question.
• State all assumptions used in providing your answer.

Case study 1

Spouses Rodney and Sarah Walker come to see you for assistance in their financial matters. Rodney works as an operations manager for an insurance company earning $140,000 p.a. plus SG. Sarah is working part time as a medical assistant earning $35,000 p.a. plus SG.

They have a mortgage of $750,000 on their home and the current mortgage interest rate is 4.7% p.a. The repayments on the loan are currently $4,350 per month.

Their other living expenses are $80,000 p.a. This amount does not include mortgage repayments and tax liabilities. They have no dependent children. They have bank deposits in joint names of $100,000 earning no interest. Rodney has a super account with AMP with a balance of $250,000 and Sarah has a super account with HESTA with a balance of $200,000.

Their home is currently worth $1,000,000 and their home contents is estimated at $90,000. Rodney has a car worth $50,000 and Sarah has a car worth $45,000. They would like to consider strategy options to minimise tax and maximise retirement savings.

Question 1

1. Prepare a balance sheet for the above clients.
2. Prepare a cashflow statement for the above clients.
3. What are seven (7) planning issues that you can identify from analysing the client’s balance sheet and cashflow? 

Question 2

1. In considering Brett’s existing investments, does this provide a likely clue to his risk profile, and if so, what are four (4) indicators to his likely risk profile?
2. In what ways could Brett’s age assist in establishing his risk profile? Compare the difference between Brett being aged 25 and being aged 62.
3. Brett would like to purchase a car for $50,000 in 3 months’ time and spend a further $50,000 for a holiday in 12 months. Brett does not want to use up all his term deposit funds when they mature. Provide at least two (2) options that could be considered as a viable funding alternatives? 

Question 3

Alfonse and Alice (both aged 65) would like to fully retire within the year. Alfonse is currently earning $75,000 p.a. (plus SG) as a part-time consultant while Alice is earning $15,000 p.a. (plus SG) as a casual teaching assistant.

They are currently residing in an inner-city terrace that they own outright (valued at $2 million).

They also have a holiday home worth $1.5 million which they would like to keep. Their combined superannuation is $850,000.

Based on their ‘moderate’ risk profile, you assume their superannuation can earn 5% p.a. net. When asked about their income needs in retirement, they want to have a combined income of $65,000 p.a. In the discussion, you agree that 3% CPI p.a. should be applied.