MU - S1 2003 - Personal Financial Planning

MU - S1 2003 - Personal Financial Planning - I MONASH...

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Unformatted text preview: I MONASH UNIVERSITY LIBRARY “j”: HIWIIIIWIII/(lWINK/MIMI”! \ 004094191 5 r CEUSEONLY Monash University Semester One 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 TIME: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING AT: (office use only — tick where applicable) Berwick El Clayton El Peninsula [3 Distance Education El Open Learning El Caulfield IZI Gippsland El Sunway El EnhancementStudies CI Other (specify) D 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 Cl OPEN BOOK YES El NO El SPECIFICALLY PERMITTED ITEMS YES CI NO if yes, items permitted are: This paper consists of Seven (7) questions printed on Five (5) pages. PLEASE CHECK BEFORE COMMENCING. This is a FINAL paper. The total number of marks available in the examination is 70. 3-0436le Page 1 of 5 OFFICE USE ONLY [ol- AFF3111 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) (b) (d) (6) 3-04361e The Superannuation Guarantee Charge currently requires the following contribution rate from employers: (i) 6% (ii) 8% (iii) 9% (iv) 12% 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 An active fund manager may adopt a bottom-up 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 future economic factors that may impact industry sector performance. A superannuation scheme defined fund is a fund where: (i) the final payout benefit is provided to the member on joining the fund. (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. Which of the following items would a financial planner not consider when completing a plan for a client? (i) changing circumstances (ii) actions and strategies (iii) marketing of services (iv) disclosure Page 2 of 5 o OFFICE USE ONLY I AFF31 ll PERSONAL FINANCIAL PLANNING . (f) The Australian economy is best described as: (i) a command economy; (ii) a socialist economy; (iii) a capitalist economy; (iv) a mixed economy. (g) If investing for a client a substantial sum of money that will require to be withdrawn in a twenty years time, a financial planner would not choose to deposit the funds in: (i) a ten year government bond. (ii) bank call account. (iii) a piece of real estate. (iv) a portfolio of shares. (h) A taxpayer who receives an unfranked dividend: (i) does net have to report dividend income. (ii) receives a tax credit of 50 per cent of the dividend. (iii) pays tax on the total dividend received. (iv) receives a tax credit equal to the rate of the company tax paid. (i) Where an asset is bequeathed to a charity under a will, capital gains tax: (i) is not payable. (ii) is payable only if the asset is later sold. (111) is payable at the rate of 50 per cent of the profit made. (iv) is payable by the estate of the deceased. (j) Taxable income for the year may be reduced by: (i) deferring the payment of deductible expenses. (ii) bringing forward assessable income. (iii) reducing rebateable items. (iv) diverting income to other taxable entities. (10 x l = 10 marks) Question Two A manied couple with two young children have requested you prepare a financial plan to meet their specific needs over the next three years. In preparation for the initial interview with the family, you prepare a list of key elements that will need to be incorporated in the financial plan construction. List the key elements required in any good financial plan and briefly describe each. (14 marks) 3-04361e Page 3 of 5 OFFICE USE ONLY I Question Three . AFF3111 PERSONAL FINANCIAL PLANNING (a) The Corporations Law requires those who deal in, or give advice about securities to hold an appropriate licence. As a financial planner working for a licensed investment adviser, what are the Corporations Law requirements that apply in order for you to operate as a financial planner for the licensed adviser. (b) Briefly discuss the Corporations Law ‘know your client rule’. (c) Explain the Corporations Law section 849 disclosure requirements. (3+2+3=8marks) Question Four A client seeks your advice on the-appropriate amount of life insurance required for himself, his wife and three primary school-aged children. (a) Calculate the amounts for A, C and D for the needs analysis below: man- 180.000 — 10,000 Needs Anal sis Life Insured Current Debts: — morta e - ersonal loans - overdraft - credit cards - other Total A vailable ands: — bank de osits - su - erannuation ~ other life insurance - other investments 7.000 -EE_ — 27,000 74,225 12,755 12,500 A: Amount needed to clear debt B. Livin re uirements u r annum C. Caital reuirements (7.5% .a.) D. Total insurance re uired 42,000 (b) List any further information you would require to assist in the calculation of insurance. (c) What forms of insurance would you recommend your client purchase? (3 + 6 + 6: 15 marks) 3-0436le Page 4 of 5 OFFICE USE ONLY (a. AFF3111 PERSONAL FINANCIAL PLANNING - . Question Five 4 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) Question Six A client is seeking your advice regarding managed investments. Explain the function, operation and advantages of managed investments to your client. (6 marks) Question Seven (a) You are considering investing in a rental apanment in the city area, and have been advised that the current capitalisation rate for the area is 6.4%. If the property you are investigating has an income of $7,500 per annum and outgoings of $1,500, calculate the price you should pay to buy the unit. (b) An investor on a marginal tax rate of 45%, requires an after tax real rate of return totalling 4%. If the current inflation rate is 2%, what earning rate must the investment have to meet your client’s requirements. (c) A property insured for $84,000 has a true value of $120,000. If a loss of $30,000 occurs, how much will be the final payout? (3+3+3=9marks) 34343616 Page 5 of 5 ...
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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 - S1 2003 - Personal Financial Planning - I MONASH...

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