Practical Assessment- Case Study Assignment
Question 1: Case study
You are a financial adviser and the following information is an extract of data you gathered as part of fact finding during an initial client consultation for married couple Alan Cheung and Sarah Cheung:
Personal details, income and savings:
|
Name
|
Age
|
Gross annual salary
|
Insurance Bond
|
Superannuation
|
|
Alan Cheung
|
50
|
$85,500
|
$45,000
|
$125,000
|
|
Sarah Cheung
|
52
|
$101,500
|
$50,000
|
$180,000
|
|
The Cheung's have one 16 year old daughter who attends a State Secondary College.
|
Additional Information
- Alan plans to retire at age 60 and Sarah plans to retire at age 62.
- Alan and Sarah have decided to save additional money for their retirement using insurance bonds, which they opened at the beginning of year. At the end of each year, they will transfer any surplus money into the insurance bonds with 60% invested into Sarah's and 40% invested into Alan's insurance bonds.
- Alan and Sarah have set an objective that will save at least 25% of their combined after tax income until their retirement.
- Assume their income will remain constant in dollar terms and that the 2015/16 tax rate will stay constant until their respective retirements.
- Assume that the school fees and related education expenses will be incurred for the next 5 years while their daughter completes secondary school and an undergraduate business degree.
- Assume that all expense amounts have been adjusted for inflation and will stay constant in dollar terms until the Cheung's respective retirements.
- Assume that both Alan and Sarah have 9.5% employer superannuation contributions until their retirement. This is paid in addition to their salary and they do not salary sacrifice into their superannuation.
Annual Budget Sheet
|
Regular Commitments
|
$
|
|
House repayments (5 year term).... ........................
|
32,500
|
|
Rates ............................................................
|
960
|
|
Electricity/Water/Gas ........................................
|
840
|
|
Telephone/Mobile ............................................
|
6,200
|
|
Pay television/Internet .......................................
|
1450
|
|
Insurance - home/contents ..................................
|
1250
|
|
School fees and related expenses ...........................
|
10,000
|
|
Insurance - car ................................................
|
875
|
|
Health Insurance ..............................................
|
3,235
|
|
Credit cards p.a .. ......................... ....................
|
6,000
|
|
Loans (10 year term)..........................................
|
8,000
|
|
Petrol/maintenance ...........................................
|
6,500
|
|
Car registration ................................................
|
720
|
|
Public transport ...............................................
|
2,800
|
|
Other expenses
|
|
|
Food ............................................................
|
13,500
|
|
Clothing/Haircuts/Beauty ...................................
|
4,500
|
|
House maintenance ...........................................
|
3,800
|
|
Medical/Dental ................................................
|
2,500
|
|
Entertainment/Dinners .......................................
|
2,500
|
|
Prof. Memberships (Sarah)..................................
|
1,000
|
|
Gifts - Birthdays/Christmas .................................
|
5,000
|
|
Total ...........................................................
|
114,130
|
Required:
A. Calculate the Cheung's combined annual after-tax income. (Assume they are exempt from the Medicare levy surcharge because they have private health insurance in Alan's name).
B. Will the Cheung's be able to meet their objective of saving at least 25% of their combined after tax income until retirement? Discuss.
C. Calculate the amount of combined savings Alan and Sarah will accumulate in their insurance bond for their retirement using two investment options. Option 1) they invest into a fixed interest insurance bond paying 2.3 % p.a. Option 2) they invest into a managed fund paying 5.5% p.a. Use an excel spread sheet or financial formulae provided below to show calculations and assume that savings are made at the end of each year.
D. Analyse two other issues the Cheung's need to consider in planning for their retirement.
Question 2: Infographic/poster
You are required to design an infographic/poster that would be used on financial planner's website or displayed in their office. The purpose of the infographic/poster is to explain to investors the key differences between investing in an unlisted managed fund and exchange traded fund (ETF).
The poster should be self-explanatory and contain real information. So you should conduct additional research and you may want to compare two actual funds. Make sure to reference your sources in the poster. The aim of the poster is to communicate essential information about funds to an audience with limited financial knowledge.
Here are some useful website references:
Infographic/poster websites:
https://piktochart.com/
https://venngage.com/
Otherwise, you can use Adobe Photoshop or Powerpoint to design the infographic/poster.
Website for unlisted managed funds:
https://www.asx.com.au/mfund/
Websites for exchange traded funds (ETFs):
https://www.blackrock.com/au/individual/ishares
https://www.vanguardinvestments.com.au/retail/jsp/home.jsp
Submission of assignment:
The infographic/poster can be submitted as a picture in a word document or by providing a web link. It is your responsibility to ensure that the examiner can accurately view the poster/infographic.
I just need question 1 be done
2000 words
3 references.