ECF3150 Personal Finance

UGCLO5 Generate creative ideas for business innovations that respond to opportunities and constant change

Key Submission Information
•      Your submission should take the form of a report to the client named in the case study.  o As this is a report intended for a client, you do not need to excessively refer to academic references.
o   However, you should ensure your report refers to appropriate industry related information.
•      Use a standard font style, 11 or 12 points in size for readability.
•      Use 1.5 or double spacing.
•      This is not a piece of academic writing. However, you must still acknowledge sources of information to substantiate your work and provide your discussions with credibility.
•      Do not exceed the word limit (excluding any images).
o   Your discussions should be elaborate enough to demonstrate the depth of your knowledge, but concise enough so your reader maintains interest.
•      You may include some images if you wish, but ensure formatting a mixture of images and text do not distract from the depth of content in your work.
o   Ensure documents can be opened and read from any device.
•      Ensure the work you submit aims to attain a professional level of quality in terms of appearance, style and content of discussion.
•      Note: You need to use the new tax rates and age pension rates that mentioned in your lecture slides.
•      Submit one Word document comprising of all parts of this assessment.
•      Submit electronically, via Blackboard>Assessment folder > Assessment Task 2> SUBMIT Assignment 2 here for grading
•      Be sure to also lodge a copy on Turnitin to verify your originality score (Assignment 2 Submission Turnitin). 
Late submission will attract a penalty as per University guidelines. Request for extensions must be made in writing at least five (5) working days before the due date.

 

Case Study One: (20%)

Hannah and Jordan are meeting with you (A Financial Adviser) for the first time. They are both 67. Jordan is working as a Manager of a cleaning company earning $100,000 per year and
Hannah has recently retired. Jordan has $240,000 in his Superannuation and Hannah has a Superannuation balance of $110,000. Their two children are grown and are no longer dependent. Jordan and Hannah own their 6-bedroom house in Nedlands which they recently had valued to be worth $1,600,000. They have no debt. Assume they have no other assets.
The purpose for the meeting is that Jordan would like to retire and they would like to know if they can draw down from their Superannuation savings an amount equivalent to Jordan’s current net income (after tax) for the next 15 years until they downsize their house. They do not want to take on any risk in their investments. They wish to live in their house for at least another 15 years. After 15 years they expect that they will be able to downsize and release equity to fund the rest of their lives.
It is immediately evident to you that their combined Superannuation balances will be rapidly depleted if they follow the path they are considering.

YOUR TASKS

  • In the form of a report written to Jordan and Hannah explain why they are unlikely to meet their objectives. Use the assumption that they will need to fund their retirement from their savings for the next 15 years until they downsize their house. This will form your ‘Base Case’. Use calculations and assumptions to show why.
  • In the form of a report to Jordan and Hannah, provide five strategies for them to consider. These strategies may require for some of their objectives to be altered. Compare each of these strategies to the ‘Base Case’
  • As an appendix to the report, provide assumptions used and calculations to support the strategies.
  • To help you get started consider – Age Pension payments, Extending the retirement date, Reducing expenditure levels, investing in riskier investments, taking on a Reverse Mortgage.
  • This report should not be in the form of a Statement of Advicewhich will be taught in Week 12.

Maximum 2000 words
What we will be looking for when we assess your report

1) YOUR ASSUMPTIONS

Have you made suitable assumptions – for example (but not limited to):

  • Rates of return
  • Inflation rate

2) YOUR CALCULATIONS

Have you made accurate assumptions, showing that your client’s initial objectives are not achievable – for example (but not limited to):

  • Current savings < NPV of planned expenditure
  • Clients rolled to pension phase (ie no tax)
  • Age pension received

3) YOUR INNOVATIVE STRATEGIES

Have you presented and discussed five alternative strategies, including the assumptions made and the associated NPV calculations? Have you suggested the use of multiple strategies to be used concurrently?  

Case Study Two: (15%)

Fiona and Dan have recently had their third child 1 month ago. They already have a 5 year old and a 2 year old. They want to review their insurances to ensure that if either of them suffer an insurable event then there is financial support for the surviving spouse and children.
Fiona (37) is a nurse and works full time earning $110,000pa. Her income is sufficient to pay all of their bills and their rent. Dan (38) is a stay at home father but expects to return to full time work when his youngest child turns 12 and starts high school. He thinks he’ll be able to earn the same as Fiona as an electrician. Once Dan starts working again, they think that his entire salary will be used to save for retirement. Fiona is healthy and fit. However she recently had an operation on her arm after a motorcycle accident. Dan is a smoker.
The mortgage on their house is $300,000.
Fiona has $200,000 in her Superannuation. Dan has $70,000 in Superannuation.
When the children go to high school for 5 years (at age 12) Dan and Fiona think that they’ll send them to private school which is currently $9,000pa each.

YOUR TASKS

  • Consider Life Insurance, Total and Permanent Disability Insurance, Trauma Insurance and Income Protection. (disregard all other types of insurance).
  • Describe these types of Insurance and how much should Fiona and Dan be insured for?
  • Discuss the impact of Fiona’s and Dan’s occupations and health on the cost (premiums) of their insurance.

Assume inflation of 2%pa and investment earnings of 6%pa.
Maximum 1500 words
 

Marking Criteria ECF3510 Assignment 2 Marks Rubric

  Criteria High
Distinction
80% – 100%
Distinction 70% – 79% Credit
60% – 69%
Pass
50% – 59%
Threshold
Fail
0% – 49%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Case
Study 1
Assumptions
[Initial
assessment of client position]
(10%)
The key and appropriate
assumptions
clearly and fully defined on
clients’ position
and the external factors
impacting
investment portfolio.
A clear, complete and concise
demonstration
and explanation to clients on the shortcomings of their current
strategy in a
manner in which
they will
understand.
 
Most assumptions made were
appropriate and defined
regarding the
clients’ position
and the external factors
impacting
investment portfolio.
A clear and strong
demonstration
and explanation to clients on the
shortcomings of their current strategy.
Some assumptions made were
appropriate but require further justification.
Good attempts were made to define the
assumptions,
with respect to
clients’ position
and external factors
impacting the investment portfolio.
Good demonstration
and explanation to clients on the
shortcoming of their current strategy.
Some assumptions made but there were minor errors and
improvements can be made.
Attempts were made to define assumptions
with respect to clients’ position.
Inadequate coverage of external factors
impacting investment portfolio.
Demonstration and explanation to clients
on the shortcoming of their current strategy
can be improved.
 
Little to no
assumptions
made, or they contain major errors.
Little to no attempt to define
assumption with
respect to clients’ position.
Lacks discussion of external factors impacting
investment portfolio.
Many
inconsistencies in
demonstration, and weak
explanation to clients on the
shortcoming of their current strategy.
Calculations
[Of alternative strategies]
(25%)
Strong, clear and correct
demonstration of the analytical
method applied,
with excellent rigor and
consideration for
robustness to assumptions made.
 
Strong and mostly correct
demonstration of the analytical
method applied,
with a good level of rigor and
consideration for
robustness to assumptions made.
Demonstration
of the analytical
method applied was mostly
correct with only some minor errors. Only some minor
improvements
can be made to robustness of the assumptions
Some demonstration of the analytical
method applied, but some minor errors.
Some considerations of the robustness of
the assumptions have been made, however
further improvements can be made
Little to no demonstration of the analytical
method applied,
and/or with major errors.
Little to no consideration for
the robustness of the assumptions needed for the analysis.
Strategies
[Explanation to client of
alternative
strategies and
the impact of each]
(25%)
[UGCLO5]
Well discussed strategies
presented, with
relevance and insight with
respect to the
clients’ position.
Strategies posed are innovative
and responsive to possible
changes in the external
environment or clients’ situation.
 
Good discussion on strategies
presented, and are mostly
relevant and
insightful with
respect to the
clients’ position.
Good attempt to pose innovative strategies that
are responsive to possible
changes in the external
environment or clients’ situation.
 
Good attempt to discuss
strategies
presented, and there is an attempt to
provide
relevance and
insight with respect to
clients’ position.
Some attempts to pose
innovative
strategies that
are responsive to possible
changes in the external
environment or
clients’ situation are seen here.
Some attempt to discuss strategies
presented, but lacks attempt to provide
relevance and insight
with respect to clients’ position.
Improvements must be made to pose
innovative strategies
that are responsive to
possible changes in the external
environment or clients’ situation. There is only currently limited
evidence that this has occurred here.
 
Little to no attempt to discuss
strategies
presented. Many flaws in
discussions. Weak
to little/no attempt to provide
relevance and
insight with
respect to clients’ position.
Strategies lack innovation, and
there is little to no evidence these
are responsive to possible changes in the external
environment or clients’ situation.
  Criteria High
Distinction
80% – 100%
Distinction 70% – 79% Credit
60% – 69%
Pass
50% – 59%
Threshold
Fail
0% – 49%
 
 
 
 
 
 
 
Case
Study 2
Description of Insurances
(10%)
Clearly demonstrate an
understanding of the four types of insurance and
the features and benefits of each.
Show an understanding of the four types of insurance and
what the insured event is for each
Identify 3 or more types of
insurance with a
brief explanation of each
Identify more than two types of insurance with a brief and
accurate explanation
of each
Identify and describe less than two types of insurance
Calculation of sums insured
(20%)
Incorporate all parts of the case study to
determine a
suitable amount to insure the
clients for each type of
insurance using Time Value of
Money principles
Incorporate most parts of the case study to
determine a
suitable amount to insure the
clients for each type of
insurance using Time Value of
Money principles
Incorporate some of the
case study to determine a
suitable amount to insure the
clients for more than two types
of insurance using Time
Value of Money principles
Show some understanding of how
Time Value of Money principles can be
applied to calculating a suitable amount to insure the clients for
more than two types of insurance
Little or no attempt to incorporate
Time Value of
Money principles into the case study
Occupation and Health impact on Insurance premiums
(10%)
Clearly articulate the specific
considerations
which may apply in relation to the case study.
Explain how the clients may
make changes to benefit their insurance costs
Show an understanding of
the occupation and health
considerations
when applied to the case study
Explain the impact
occupation type
and health on
the level of insurance
premiums
relevant to the case study,
Explain the impact occupation type and
health on the level of insurance premiums
Little or no demonstration of
understanding the
considerations of health and
occupation on
Insurance premiums.

 

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