This is a group assignment and you will be required to form a group in the first two classes. A group is 4 students. Each member of the group is to participate fully in the assignment and the group is required to submit a signed statement attesting to full participation and contribution by group members. Where the group believes a member has not contributed sufficiently to the work submitted, this should be documented. In this event, the member may receive a lower mark for the assignment than the other group members.
Your assignment should be typed and securely mound. Start each question on a new page. Show your workings. You should use the following assumptions in your calculations. If you need to make other assumptions please state them. Inflation 2%, investment earnings 4%, investment growth 4%, cash interest rate is 1. 5%, interest rates on mortgage borrowings 3%. SAFE 1016 1 Personal Wealth Management SEMESTER 1 2013 Question 1 Calculate the following ratios for Winston and Woven Net worth ratio Liquidity ratio Savings ratio Debt service ratio
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Describe what stage in the life cycle Winston and Woven are in. Based on the ratios you have calculated, summaries and analyses Winston and Woven’s current financial situation commenting on whether their situation is as you would expect for a couple in that stage of the lifestyle. 10 Marks Question 2 Calculate the amount Winston and Woven would need to save each month to meet their goal of having sufficient funds to meet their funding goals for their children’s education. You can assume that the funds are invested (e not held in cash). Marks Question 3 Calculate the amount Winston and Woven would need to contribute to their mortgage each month to meet their goal of having their mortgage paid off in 10 years time. 12 Marks Question 4 Explain the advantages and disadvantages of borrowing to invest. Advise Winston and Woven whether a leveraged investment plan would be suitable for them giving reasons why. (Calculations not required. ) 6 Marks Question 5 Prepare a cash flow statement for Winston and Woven for the next 20 years. Assume that their salaries and living expenses will increase by inflation.
You may make any other assumptions you believe necessary to complete this task – but make sure you note them. 15 Marks 2 Personal Wealth Management Question 6 Calculate how much Winston and Woven will have invested in 20 years time if they invest their annual excess cash flow. Excess cash flow is the balance of cash after meeting all expenses, including savings for educational expenses and mortgage repayments calculated in questions 2 & 3. 10 Marks Questions 7 Calculate whether Winston and Woven will have sufficient funds at retirement to meet their detriment income goal. 0 Marks Question 8 Write a report to Winston and Woven explaining whether or not they are able to meet all their goals. You should draw on your work in questions 1-6 to support your advice. (This work can be included as an attachment to the report. ) Advise them what, if anything, you would recommend they do to assist them to achieve their objectives.