AFAS300 Principles of Financial Literacy

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AFAS300 Principles of Financial Literacy
Individual Assignment – Semester 3 -2015
Due to be submitted no later than 5PM Monday 25 January 2016
NO late assignments will be accepted, therefore students who fail to submit their
assignment by the above due date will be awarded a zero mark (NO EXCEPTIONS)
The assignment needs to be submitted online by the above date in a soft copy format via
the Turnitin link placed on the ilearn course website.
This assignment will comprise a total of 20% of the marks allocated for this Course.
Important Notes:
• The assignment must be typed (font 12, Arial or Times New Roman)
• Attempt ALL questions
• Where appropriate, the use of tables, graphs, flowcharts, etc. is encouraged to
help illustrate your point clearly
• Show workings and calculations where applicable
• Marks will be awarded for the presentation of your work
• Assumptions need to be reasonable and logical and cannot conflict with the facts
in the question/s and must be clearly stated
• Always explain and justify your answer/s /recommendation/s
• You are expected to do some research and refer to material from outside the
prescribed textbook to complete this assignment
• Clearly state your source reference/s
• Total maximum word limit is 3,000 words
• Plagiarism by any student/s will render the student/s involved a zero mark and
possible further actions by the University
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Case study – Couples information
Couple 1 Couple 2 Couple 3
Profile Wealth Accumulators Pre- Retirees Retiree
Names James & Tammy Spyros & Danielle Tim & Jane
Ages James: 28, Tammy: 27 Spyros:53, Danielle: 50 Tim 66, Jane: 63
Marital Status Recently married Married (2 children
ages 21 & 15)
Married (2 children and
2 grandchildren ages 2&4)
Dependents 0 1 0
Occupation James: Pilot
Tammy: Lawyer
Spyros: Accountant
Danielle: Teacher
Tim: Retired
Jane: Retired
Household
Income (after
tax)
$130,000 $240,000 $110,000 (Pension and
investment income)
Living
Expenses
$120,000 $140,000 (including
mortgage)
$80,000
Assets (Total
assets owned
by the couple)
Home : Renting
Superannuation
$100,000 (3 accounts
for James and 2 for
Tammy)
Cash at call: $12,000
Term deposit: $30,000
(matures 12 Jan 2016).
Car: $100,000
Home: $1.5 Million
Superannuation
$600,000
Cash at call: $25,000
Term deposit: $55,000
(matures 5 Jan 2016)
Share & managed
funds $200,000
Cars: $120,000
Home $2.2 Million
Superannuation Pension
$900,000
Cash at call: $40,000
Term deposit: $250,000
(matures 18 Jan 2016)
Shares & managed funds
$350,000
Car: $80,000

Liabilities Credit cards $12,000
Personal loan:$18,000
Car Loan:100,000
Home Loan $225,000 Nil
Risk profile High Growth Growth Balanced
Goals &
objectives
Paying off debt,
saving a deposit to buy
a house and
going on a skiing
holiday to the USA
Paying off a home loan,
saving ,
paying for private
school fees and
saving for retirement
Comfortable retirement,
going on a European
holiday in the next 12
months and
starting a sinking fund for
their grandchildren
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Assignment Questions (Total 100 marks)
IN YOUR OWN WORDS You need to prepare a report to answer the question below
related to the 3 couples above. Your report needs to explain and discuss issues
asked in the question below relating to the 3 couples’ specific circumstances.
1. Describe why budgeting and financial planning is important element in assisting
the 3 couples achieving their goals and objectives. You need to relate specifically
to 3 couples’ specific goals and objectives. Provide clear examples where
applicable. (20 Marks)
2. What are the key features, advantages and disadvantages of the following
investments? Comment specifically on the suitability of each of these investments
to each of the couples above and provide comparison where appropriate. Explain
and justify your answer.
a. Exchange Traded Funds (ETF) vs. mutual trust/managed funds
b. Australian shares/stocks vs. International shares/stocks
c. Government bonds vs. Corporate bonds
d. Gearing (borrowing to invest)
(40 Marks)
3. Explain why it’s important to consider insurance as part of risk management. List
2 general insurance and 2 personal insurance types/products and explain why
they should be considered by any of the 3 couples above (you only need to list
and explain 4 different products in total (i.e. not 4 for each of the couple)).
(10 Marks)
4. Explain why it’s important to consider superannuation as part of saving for
retirement and retirement planning. List and explain 2 possible superannuation
recommendations that should be considered by any of the 3 couples (you only
need to list and explain 2 (i.e. not 4 for each of the couple)).
(10 Marks)
5. Explain why it’s important to consider having a valid will and an appropriate
power of attorney as part of the couple’s estate planning highlighting the benefits
and risks as applicable. In your answer relate specifically to each of the 3 couples
individual circumstances.
Report Presentation (10 Marks)
Your report needs to be professionally presented and reader friendly. Ensure you
address the points listed on page 1 of this assignment.
END OF ASSIGNMENT