Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Trimester 1 2022 SAMPLE Examination

MAA255

Financial Planning

QUESTION 1 – This question has FOUR parts (a), (b), (c), and (d).

Susan has shares in an Australian mining company, ABC Ltd. She has received a final dividend statement for the year. Susan needs you to explain some things about the statement to her. The details are as follows:

Franking credit = $75.00

Q1 Part (a) Explain the meaning of the ‘franked amount’.

Record your answer to Q1 Part (a) here:

Q1 Part (b) Explain the meaning of the ‘franking credit .

Record your answer to Q1 Part (b) here:

Q1 Part (c) Explain how Susan is required to report this information on her tax return.

Record your answer to Q1 Part (c) here:

Q1 Part (d) Suppose Susan earns a salary of $50 000, has no other income apart from the shares and does not have private health insurance. Calculate her tax payable including her Medicare liability and entitlement to the Low-Middle-Income Tax Offset and Low-Income Tax Offset if applicable.

Record your answer to Q1 Part (d) here:

QUESTION 2 – This question has TWO parts (a), and (b).

James is aged 42 and Olivia is aged 38.  Olivia works a stay-at home mum whilst James runs his own consulting firm from an inner suburban office, which produces an average net profit of $150,000 before tax.  They have two children, aged 8 and 10 whom they expect will remain dependent until age 24 at which time the living expenses will decrease by $13,000 p.a. for each child when they leave home. They own their own house worth $1,000,000, which is subject to a mortgage of $275,000. They also own an investment property worth $900,000, which is subject to a mortgage of $650,000. They also have an outstanding credit card debt of $12,000. Both James and Olivia own their own cars. The couple’s living expenses total $84,000 p.a. including payment of a $27,600 p.a. annual mortgage payment. The couple would like to send the children to a private school from years 9 – 12 which is expected to cost $160,000 in total. In event of death of either James or Olivia, they estimate death and medical expenses to cost around $12,000. James currently has life cover of $150,000 in his superannuation fund (his current superannuation fund balance is $225,000) whilst Olivia has no life cover, also they have no other personal insurances. James’ father passed away recently at age 67 because of heart disease, which seems to be a hereditary problem in James’ family.

Q2 Part (a) What type of insurance policies would you recommend for James and Olivia to protect their personal risks? Discuss the merits for each of the types of insurance policies.

Record your answer to Q2 Part (a) here:

Q2 Part (b) Using the multiples approach, calculate how much additional life insurance might be recommended for James? Assume the reinvestment rate is 8% per annum.

Record your answer to Q2 Part (b) here:

QUESTION 3 – This question has ONE part

Assume you are currently 25 years’ old and will start your career in financial planning as a graduate next year. On average a graduate in this industry earns about $60,000 a year so let’s assume this is your starting salary package (i.e. this amount includes the super guarantee contributions). Your salary itself is expected to increase by 2.5% per year that accounts for increases due to the CPI and any promotions throughout your lifetime. You can assume the tax rates to remain constant, and that inflation (CPI) is 2% per annum. Your superannuation funds are invested in a growth option. The growth option is expected to generate a net return of 5.0% per annum (net of tax and fees) for the foreseeable future. Your current super balance from previous jobs is $100,000. Your goals is to retire at 50 years of age. 

Required:

With the help of the table below, calculate the closing balance in your superannuation (i.e. how much you’ll retire with) at age 30. If you make any further assumptions just note them below the table.

QUESTION 4 – This question has THREE parts (a), (b), and (c).

Sally has just inherited $200,000 and she wishes to invest in a manage fund or a combination of managed funds. Sally earns a good income, owns her own home and is able to save. She classifies herself as a moderately aggressive investor.

You have identified three managed funds:

· Larry Fund which is an active growth manager fund.

· Curly Fund which is an active value manager fund.

· Mo Fund which is a passive manager fund.

Q4 Part (a) Explain to Sally the difference in each fund manager style.

Record your answer to Q4 Part (a) here: 

Q4 Part (b) Advise Sally on which type of fund or which combination of funds might suit her investment needs.

Record your answer to Q4 Part (b) here: 

QUESTION 5 – This question has 2 parts (a), and (b).

Penny is aged 68. She is single and owns her own home. She has the following assets and liabilities as of July 1, 2022.

Penny is working part time and currently earns $300 per fortnight. Penny has not previously ‘banked’ any of her income with Centrelink. (As she is applying for the age pension her work bonus bank has a zero balance).

Q5 Part (a) What is Penny’s fortnightly entitlement to the aged pension under the Asset Test?

Record your answer to Q5 Part (a) here:

Q5 Part (a) Suggest four strategies to Penny that she can use to improve her financial position.

Record your answer to Q5 Part (b) here: