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MU - S2 2003 - Personal Financial Planning

MU - S2 2003 - Personal Financial Planning - MONASH...

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Unformatted text preview: MONASH UNIVERSITY LIBRARY llll |||| llll 00409441 5 OFFICE USE ONLY Monash University Semester Two Examinations 2003 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AFF3111 TITLE OF PAPER: PERSONAL FINANCIAL PLANNING EXAM DURATION: 3 Hours READING THVIE: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING A T: (office use only — tick where applicable) Berwick El Clayton El Peninsula El Distance Education El Open Learning El Caulfield l2! Gippsland E] Sunway El Enhancement Studies [3 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 CALCULATORS YES NO El OPEN BOOK YES El NO SPECIFICALLY PERMITTED ITEMS YES El NO if yes, items permitted are: 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 available in the examination is 70. 3'09”"? Page 1 of4 OFFICE USE ONLY DE AFF31 1 1 PERSONAL FINANCIAL PLANNING 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. Question One (a) The Superannuation Guarantee Charge currently requires the following contribution rate from employers: (i) 6% (ii) 8% (iii) 9% (iv) 12% (b) The builder of a large suburban office complex has been advised to set up a publicly listed trust to entice individual investors to subscribe for units. The type of trust to be established would be: (i) a Mortgage Trust (ii) a Property Trust (iii) an Equity Trust (iv) a Cash Management Trust (c) An active fund manager may adopt a top-down approach in analysing fundamental factors that are believed to influence share prices. This approach will: (i) identify specific firms for inclusion in an investment portfolio. (ii) provide a measure of the level of unsystematic risk in the market. (iii) compare the performance of firms through financial ratio analysis. (iv) identify filture economic factors that may impact industry sector performance. (d) A superannuation scheme accumulation (defined contribution) fund is a fund where: (i) the final payout benefit is provided to the member on joining the fimd. (ii) the final payout benefit depends upon the performance of the fund. (iii) payout is specified under the Superannuation Guarantee Legislation. (iv) the benefit is paid in the form of a lifetime annuity. (e) Which of the following items would a financial planner need to consider when reviewing a plan for a client? (i) changing circumstances (ii) actions and strategies (iii) marketing of services (iv) disclosure 3-0917le Page 2 of 4 p OFFICE USE ONLY CD3 . (f) Which of the following is not a “financial investment” for deeming purposes: AFF3I l 1 PERSONAL FINANCIAL PLANNING 1. (i) Bank Account (ii) Investment Property (iii) Shares in A.M.P. (iv) Insurance Bond. (g) The “bottom” of an economic cycle is not usually characterised by: (i) a low level of employment. (ii) a low level of investment spending (iii) a lack of investment opportunities (iv) a low level of liquidity preference (h) A Normal or Upward Sloping Yield Curve implies that: (i) Short-term interest rates are more volatile than long-term rates. (ii) Inflation is expected to decline in the future. (iii) The economy is at the peak of a business cycle. (iv) Investors require a premium for longer term lending. (i) Which of the following is not the duty of the trustee: (i) To preserve the assets of the estate. (ii) To appoint a new trustee in place of a retiring trustee. (iii) To exercise reasonable care in the administration of the trust. (iv) To act impartially and in good faith for the benefit of beneficiaries. (j) Which statement is correct: (i) Rebates reduce the taxable income. (ii) Deductions reduce the tax payable. (iii) Rebates reduce the assessable income. (iv) Deductions reduce the assessable income. (10 x 1 = 10 marks) Question Two Risk management techniques may involve avoidance, control, transfer and retention. Define each of the above methods of risk management, and provide an example of each within the context of personal financial planning. (8 marks) 3-0917le Page 3 of 4 OFFICE USE ON LY m Question Three . AFF3111 PERSONAL FINANCIAL PLANNING For individuals in receipt of the Age Pension, the Government deems them to have earned the following rates on their financial assets: Single Pensioners — 2.5% on the first $35,600, 4.0% on assets above $35,600. Pensioner Couples — 2.5% on the first $59,400, 4.0% on assets above $59,400. (a) Explain why this process has been introduced by the Government. (b) What impact does this process have on the actual income flows of pensioners? (4 + 4 = 8 marks) Question Four There are a number of steps involved in preparing a financial plan for a client. List and briefly describe each of the steps. (15 marks) Question Five (a) Assuming a corporate taxation rate of 30%, calculate the effect of receipt of a $320.00 fully franked dividend for an investor with a marginal tax rate of 47%. (b) If the full single pension is $452.80 per fortnight, calculate the amount of pension entitlement for Mr. X if his assets consist of a bank deposit account of $15,000 earning 0.5%, and a managed bond fund of $50,000 earning 7.5% per annum. (c) An employer contributes $4,000 toward an employment fringe benefit of $8,000. Calculate the amount of fringe benefits tax payable at the rate of 48.5% by the employer. (3+3 +3=9 marks) Question Six You prepared a financial plan for a client which included projected incomes and capital growth for the recommended investments over a five year period. Now, two years later, some of the investments are not achieving the returns predicted. If the suggested projections were based on information supplied by the managers of the investments purchased, discuss the implication this has for you as the financial planner? (10 marks) Question Seven (a) Explain the essential basic requirements for a will to be valid. (b) Explain what you understand by the term “power of attorney”, its purpose, use and limitations. (5 + 5 = 10 marks) 3-0917]: Page 4 of 4 ...
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