MU - S1 2001 - Personal Financial Planning

MU - S1 2001 - Personal Financial Planning - MONASH...

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Unformatted text preview: MONASH UNIVERSITY LIBRARY lllllllllllllllll if; :5; - _ 004092978 OFFICE USE ONLY __’-—-" l _, NO . Elt'jy‘H-t TWP. ‘ Monash University Semester One Examinations 2001 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AFF31 11 TITLE OF PAPER: PERSONAL FINANCIAL PLANNING EXAM DURATION: 3 Hours READING TINIE: 10 Minutes THIS PAPER IS FOR STUDENTS ST UDHNGAT: (ofli‘ce use only — tick where applicable) Berwick El Clayton El Peninsula El Distance Education El Open Learning El Caulfield E Gippsland E] Sunway El Enhancement Studies El Other (specify) CI 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 OPEN BOOK SPECIFICALLY PERMITTED ITEMS 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. 10324LE Page 1 of 5 OICE SE ONLY I 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. 9 Select the response that you feel best answers the question asked. Question 1 (3.) Which of the following does not constitute a direct investment? (i) Purchase of a home unit. (ii) Placing $1,000 on fixed deposit with the bank. (iii) Purchase of unlisted property trust units. (iv) Purchase of debentures in a public company. (b) For deeming purposes, which of the following is considered to be a “financial asset”? (i) Shares in a publicly listed corporation. (ii) Purchase of a house to provide rental income. (iii) A standard life insurance policy. (iv) Money held in a superannuation fimd. (0) Which of the following is not an example of personal insurance cover? (i) Disability insurance. (ii) General insurance. (iii) Tenn insurance. (iv) Private health insurance. (d) Which of the following risk strategies would you adopt for losses of high severity but low frequency? (i) Risk avoidance. (ii) Risk retention. (iii) Risk transfer. (iv) Risk reduction. (e) If the g0vernrnent increases the amount of money in circulation, interest rates are most likely to: (i) increase. (ii) decrease. (iii) stabilise. (iv) remain unchanged. 10324LE Page 2 of 5 OFFICE USE ONLY I AFF31 l 1 PERSONAL FINANCIAL PLANNlNG (t) Increased consumer and investment spending, higher price and wage levels, and rising employment and national income are characteristics of which stage in the business cycle? (i) Boom. (ii) Contraction. (iii) Recession. (iv) Expansion. Capital Gains Tax on an asset bequeathed in a will to a non-taxed charity is: (i) paid by the charity after receipt. (ii) paid by the estate of the donor. (iii) paid only if the asset is sold by the charity. (iv) paid by the charity at a reduced rate. To realize and disburse the assets of an estate, the executor must apply for: (i) a grant of probate. (ii) letters of administration to collect goods. (iii) letters of administration (intestacy). (iv) letters of administration with the will annexed. If purchasing an annuity using an Eligible Termination Payment, which of the following benefits is not allowed? (i) a joint life contract. (ii) reversion to spouse. (iii) 100% residual capital value. (iv) C.P.I. indexing of the income. Undertaking a review of a financial plan means: (i) rereading the details of the plan to ensure all recommendations are included. (ii) changing the calculations included to recognise a change in inflation. (iii) requesting the typist to check for spelling errors. (iv) checking to see whether the client’s circumstances have changed since its formulation. (10 x l = 10 marks) Question 2 A client has approached you seeking advice on purchasing units in a managed investment fiind. Explain the fiinctiori, operation and advantages of using a managed investment. (10 marks) 10324LE Page 3 of 5 OFFICE USE ONLY .- AF F31 11 PERSONAL FINANCIAL PLANNENG Question 3 . Discuss the use of “means testing” as applied by the government to ascertain eligibility for an aged pension. (7 Marks) Question 4 Most financial plans make use of specific investment strategies to achieve their desired outcomes. Clearly explain the different strategies that may be used, providing an example of a particular investment product that could be applied to the strategy. (12 marks) Question 5 (a) An investor purchased a block of land in July 1996 for $35,000, with purchase costs amounting to $3,750. The block is to be sold in June 2001 at a price of $44,500, with no selling costs to the investor. If the CPI has moved from 115 to 120.2 during that time, calculate the capital gains tax. payable by the investor on a marginal rate of 35%. (b) An. employee receives $5,000 toward the purchase of a lap—top computer for his own use. Calculate the amount of fringe benefits tax payable by the employer at the rate of 48.5%. (c) You have insured your home for $100,000 when the current market value is $120,000. A fire damage loss of $50,000 occurs. Calculate the amount reimbursed by the insurance company. (3+3+3=9marks) Question 6 Every good financial plan has a number of key elements that must be included. Identify, and briefly discuss, the issues relevant to each of these elements. (12 marks) 10324LE Page 4 of5 OFFICE USE ONLY I AFF3111 PERSONAL FINANCIAL PLANNING Question 7 A client seeks your advice on the appropriate insurance products to include in a retirement plan for herself and her husband. (a) Calculate the amount of life insurance that would be needed if such a product was recommended. (b) What other factors would need to be considered before recommending a list of specific insurance products to your clients. (4 + 6 = 10 marks) Note: Be sure to write your- answers in the examination booklet Needs Analysis Current Debts: Mortgage Personal loans Overdraft Credit Cards Other Total Available Funds: Bank deposits Superannuation Other life insurance Other investments Total A. Amount needed to clear debt B. Living requirements per annum C. Capital requirements (8% pa.) D. Total insurance required 10324LE 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 2001 - Personal Financial Planning - MONASH...

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