MU - S2 2002 - Personal Financial Planning

MU - S2 2002 - Personal Financial Planning - HDNASH...

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Unformatted text preview: HDNASH UNIVERSITY LIBRARY Ill“Willi“it‘llill . ‘x‘ _ EXAMINATIONS ' 004093707 SECTION ‘ OFFICE use ONLY Monash University Semester Two Examinations 2002 Faculty of Business and Economics Department of Accounting and Finance EXAM CODE: AFF31 11 TITLE OF PAPER: PERSONAL FINANCIAL PLANNING EXAM DURATION: 3 Hours READING TIME: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING AT: (oflice use only — tick where applicable) Berwick El Clayton III Peninsula D Distance Education El Open Learning El Caulfield El Gippsland El Sunway El Enhancement Studies El Other (specify) El Candidates are reminded that they should have no material on their desks unless their use has been specifically permitted by the following instructions. AUTHORISED MATERIALS NON-PROGRAMMABLE CALCULATORS YES E OPEN BOOK YES El SPECIFICALLY PERMTTED ITEMS YES El This paper consists of Seven (7) questions printed on Four (4) pages. PLEASE CHECK BEFORE COMMENCING. This is a FINAL paper. The total number of marks is available in the examination is 70. 2-09481e.doc Page 1 of 4 OFFICE USE ONLY Answer the following question in the answer booklet provided by writing the Question Number, the . part (a-j) and the nominated answer. Select the response that you feel best answers the question asked. AFF31 ll -- PERSONAL FINANCIAL PLANNING Question One (a) The sector of the economy that is usually a net saver is: (i) the government sector (ii) the business sector (iii) the household sector (iv) the overseas sector (b) When the Australian Government issues a new series of bonds to the Australian public this will have the effect of: (i) increasing interest rates (ii) decreasing the level of savings in the community (iii) causing interest rates to decrease (iv) no impact on interest rates or savings (0) Under the “deeming rules” which of the following items would be included in “financial assets”: (i) money held in a retirement savings account (ii) a funeral bond ' (iii) a holiday home with a 10 year mortgage (iv) debentures in a government authority ((1) Decreases in aggregate spending, price levels, wages levels and the level of national income is generally associated with which stage of the business cycle? (i) a peak (ii) a contraction (iii) an expansion (iv) a depression (e) The Deductible Amount of an annuity is the: (i) lump sum used to purchase the annuity (ii) lump sum benefit paid at the expiration of the annuity term (iii) portion of an annuity payment which is deemed to be retmn of capital (iv) capital value on conversion of part of an annuity into a lump sum. (0 An investor may add a rental property to their existing investment portfolio of securities in order to: I. (i) achieve a lower, more secure return (ii) access a less diversified range of property investments (iii) lower the level of risk in their portfolio (iv) all of the above 2—09481e.doc ' Page 2 of 4 OFFICE USE ONLY AF F31 ll - PERSONAL FINANCIAL PLANNING . Question One (cont'd) ' ' (g) An inverse yield curve reflects: ‘ (i) investor preference for longer term investments (ii) a premium demanded for long—term securities (iii) an expected rise in interest rates in the long-term (iv) a view that inflation rates will fall in the future The prohibition on misleading conduct when advising on securities is covered in: (i) The Trade Practices Act (ii) Common law (iii) The FPA Code of Ethics (iv) The Corporations Law To collect the assets of an estate, an executor applies for: (i) a grant of probate (ii) letters of administration (intestacy) (iii) letters of administration with the will annexed (iv) letters of administration to collect the goods The implementation stage of the financial plan will he carried out by: (i) analysing the client’s future cash flows (ii) asking the client to think about plans for the filture (iii) listing who is responsible for which action in the plan (iv) executing the agreed plan (10 x 1 = it) marks) Question Two Briefly discuss how a client’s attitudes toward risk, as revealed in the data gathering stage, may impact on both the goal setting process and any recommendations made within the financial plan. (10 marks) Question Three A new client has just received a legacy of $100,000 and has approached you for advice on investing this amount. He has heard that interest rates are expected to rise in the near fiiture, and wants to invest all of the money into fixed interest securities to benefit from these rises. List and explain the important considerations that your client should be made aware of before committing the money to this type of investment. (10 marks) 2-0948le.doc Page 3 of 4 OFFICE USE ONLY I AFF3111 ~ PERSONAL FINANCIAL PLANNING 7 Question Fou_r . (a) Apart from the salary received from her full—time employment, your client also has received a. ' ‘ i fully firanked cheque for $560 from a managed imputation fund and a cheque for $250 from as fixed income term investment. Calculate the effect these receipts will have on her tax liability "a. for the year if her marginal tax rate is 42%.. (b) An age pensioner has $15,000 in a cash management trust that earns 3.75% pa. and a further $52,000 in a managed imputation fimd earning 10.8% p.a. Calculate the level of income that is “deemed” to have been earned under the current deeming rules. (c) A 31 year old self-employed accountant intends to contribute $18,000 to her superannuation fund for the year 2002/3. Her actual tax deduction is limited to the lesser of (i) the $12,651 age-based limit, and (ii) $5,000 + 75% of the excess over $5,000. Calculate the contribution she would need to make to obtain the maximum allowable taxation deduction. (3 x 3 = 9 marks) uestion Fig Lee Idol purchases an annuity using $108,000 of his own funds. His life expectancy is twelve years. The annuity will pay him $12,000 per year. (a) Calculate the amount of the annuity payment to be included in Lee’s taxable income each year. (b) How much of the annuity will be included in the Income Test by Centrelink? (c) How would your answer in (a) change if the annuity had been purchased from an Eligible Termination Payment with a $12,000 undeducted contribution and $96,000 as the post June 1983 component? (3 +3+3=9marks) Question Six; In order to make a valid will, the testator must have ‘testamentary capacity”. Briefly explain what you understand by the term “testamentary capacity” and the conditions that must exist for a will to be accepted as valid. (2 + 6 = 8 marks) Question Seton A financial plan is usually described as containing a number of specific components. List and briefly describe each of the components necessary within a well constructed plan. (14 marks) 2~09481e.doc Page 4 of 4 ...
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This note was uploaded on 08/25/2008 for the course AFF 3111 taught by Professor Smith during the Three '08 term at Monash.

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MU - S2 2002 - Personal Financial Planning - HDNASH...

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