FIN08103

Planning Personal Finance

ASSESSMENT 2

规划个人理财代写 The Module is assessed by two separate Components; an Essay and a Case Study. Each assessment accounts for 50% of the overall Module mark.

The Module is assessed by two separate Components; an Essay and a Case Study. Each assessment accounts for 50% of the overall Module mark.

The pass mark for the Module is 40% and you are required to achieve a minimum mark of 30% in both Components.

Component 2 Case Study 规划个人理财代写

Steven and Kerry have recently had their first child (Lilly) and are on the lookout for a larger house in which to raise their family. They currently live in a 2- bedroom flat near the centre of Edinburgh and are paying approximately £600 per month on their mortgage. They are now looking for a property on the outskirts of the city as it will be more peaceful there for the benefit of Lilly (and any other children they may have in the future). They have viewed a 3-bedroom house with an asking price of £400,000 and the valuation survey on the property (this was a requirement by the mortgage lender) has valued it at £375,000.

Their mortgage company have agreed to lend them 75% of the property value, the rest will need to be paid by Steven and Kerry. They will also need to pay Land and Building Transaction Tax (LBTT) on the property, and the legal fees will be 1.10% of the purchase price. They will also need to pay around £1,500 in moving fees to take all their furniture and other belongings to their new house.

Steven earns £45,000 a year working at a local school and Kerry currently earns £38,000 as a freelance designer in the city. They opened a joint current account at their local bank when they married three years ago, although the current interest rate on any balance is 0%. However, last year Kerry earned £25 interest from a savings account she has on her own. Kerry also owns 8,200 ordinary shares in an Investment Trust and these are currently trading at £4.80 each (which she bought five years ago at £2.00 each).

She earned £1,127.50 in dividends from these shares last year.Steven also owns some shares in a local football club that he has supported since he was a child. He thinks they are only worth a few hundred pounds and they have never paid out any dividends. Steven has always kept them for sentimental reasons, rather than as a serious investment, and now that he and Kerry have a family to think about he wonders if he should perhaps sell these shares. 规划个人理财代写

Recently Kerry’s mother was diagnosed with cancer, something that seems rather common in her family, and she is concerned that this might be hereditary and she may succumb to an early death. While Steven should be able to survive on his decent enough salary, Kerry is concerned that if anything should happen to her he would struggle to pay off the mortgage on their new house, or be able to look after their children properly. She is therefore considering taking out a Permanent Health Insurance (PHI) policy.

After talking this over they both realise that they have no life or health insurance at all and have done virtually nothing by way of general financial planning. They both agree that they need more protection, starting with insuring each other’s lives just in case something unexpected should happen to one of them. Steven also suggests that they take out life insurance on his mother and Lilly as well.

Steven and Kerry both have their own cars (to allow them each to drive to work every day). They like to go hill-walking and mountaineering in the Scottish mountains, particularly in the winter-time when there is snow on the hills. Kerry also owns some valuable art and design pieces that she has collected over many years through her work contacts. She doesn’t think that any of these issues would need to be mentioned on any insurance proposal form.

In January this year, Kerry bought £18,000 nominal of 3.75% Treasury stock, redeemable in 2040. The price of this stock is now £131.50 per £100 nominal.

Assessment 规划个人理财代写

You are simply required to go through each of the following questions in turn. You should not write above 2,000 words in total although you may also have additional material in the form of tables, calculations etc. Make sure that you cite and reference any additional material that you refer to in your answers. Use the APA 7th reference system.

You MUST show ALL relevant calculations in your answers to those  questions that require a calculation.

Do not cite Investopedia or Wikipedia! Do not cite any University Module Material!

Answer the following questions (Based on the current tax year 2021-22)

规划个人理财代写
规划个人理财代写
  1. How much will Kerry and Steven receive as a mortgage on their new property? What is the total of all other related expenses (on their new house only) before they can move in?

(6 marks)

  1. Steven has just checked the value of his football club shares and they are currently worth only £160 in total. He would like to pass them on to his children eventually but wonders if this is the right thing to do given how little they are worth. What advice would you give to Steven regarding his shares and whether he should keep them or sell them?

(6 marks)

  1. Explain to Kerry what the level of benefits might be on a Permanent Health Insurance (PHI) policy and whether cancer is even covered here. What alternative health insurance policy might be more appropriate and why? 规划个人理财代写

(6 marks)

  1. Read carefully what Kerry and Steven have said regarding their insurance needs. Bearing in mind all they have said, what advice would you give to them?

(10 marks)

  1. You have no information so far on the pension arrangements of Steven and Kerry. On enquiring into this, you discover that Steven has been contributing 10.0% of his salary into his company’s final salary scheme for the last 10 years and he is now aged 32. The pension is an 80ths scheme, with an additional one-off tax-free lump sum of three times his pension paid on his retirement date. The Normal Retirement Age (NRA) of his company scheme is 60 years of age. Kerry is aged 30 and has made no pension arrangements other than a Personal Pension that she took out while working for a previous employer. The current value of this fund is £16,000 and the annuity rate on this pension fund is currently 4.15%.

What are their pensions currently worth, and what can they expect to receive in retirement (including from the State)? In addition advise them on how they could improve their pensions in the future and how this can be tax-efficient for them.

(16 marks)

  1. Each year Steven pays £500 to a local sports club that is a registered charity. Kerry pays £2,000 a year direct to her young niece who recently graduated from veterinary college. Kerry has now decided to sell half of her Investment Trust shares at the current price of £4.80 each. From all of the information provided, calculate both Kerry and Steven’s tax liability for tax year 2020/21. 规划个人理财代写

(20 marks)

  1. Advise Kerry whether it is better to sell the 3.75% Treasury stock 2040 or keep it until the redemption date. What are the net interest yield on the stock and the net redemption yield on the stock?

In addition, how much did each of Kerry’s Investment Trust shares pay out in dividends last year (in pence), and what is the current dividend yield on these shares?

(10 marks)

  1. Kerry and Steven are wondering about the best type of mortgage to take out on their new home. Describe the advantages and disadvantages of both capital and interest (repayment) mortgages, and interest-only mortgages.

(8 marks)

  1. Kerry is thinking of investing in OEICs and has been advised that it is normally better to invest in a monthly savings scheme than to buy shares with a lump sum payment. Clearly explain to her (with your own relevant calculated example) how this can be achieved through Pound Cost Averaging (PCA).

(8 marks)

10.When they move they will need to take out a loan to replace the rather dilapidated bathroom in their new house. They have been offered a loan of £15,000 over 5 years at 6.95% per annum, repayments to be made monthly. There is an initial Administration Fee of £500 and there is a final Settlement Fee of £295. Calculate the APR.

(5 marks)

11.Calculate the following on Kerry’s mother’s two bank accounts: 规划个人理财代写

a.The compound interest and total return on £20,000 deposited in a Cash ISA at 3.25% per annum over five years.

b.On a balance of £17,730.97 inclusive of compound interest at 2.95% over three years. How much, therefore, is the original capital sum deposited in this case?

(5 marks)

Total Marks: 100

 
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