AFAS200: Principles of Financial Literacy

AFAS200: Principles of Financial Literacy – Child Care – Case Study Assignment Help

Case information on Richard:

– Middle aged, married, three dependent children (all under 6 years old), home owner

– Chief executive officer of medium sized business

– Major assets and liabilities

Home AUD1.8 million

Home loan AUD1.2 million

Super AUD0.4 million

– Financial objective is to buy a larger home in about five years (and sell the existing home)

– Richard considers himself to be a risk taker, depending upon the circumstances

Task: 1

Discuss the key factors that Richard should take into consideration for his financial plan and the allocation of savings. In your response make specific references to the case information.

Discuss how Richard can use insurance to protect himself and his family against three key risks.

Richard is considering purchasing some shares in the company he works for. The company is listed on ASX and has a current share price of AUD3.50. Earnings in 2017 were AUD0.35 per share and in 2016 were AUD0.30 per share. The average PE (based upon projected earnings for 2018) for similar companies is 11.5.

Review this potential investment by Richard and prepare a recommendation.

Case: 2

Case information on Justine:
– Age 27, single, no dependents, home renter
– Chartered accountant working for KPMG
– Monthly budget surplus AUD4,500 (before car loan repayments)
– Major assets and liabilities

Car AUD45,000

Car loan AUD40,000

Super AUD25,000

Cash in bank AUD2,500

– Financial objective is to repay the car loan within 3 years and to purchase an apartment within 5 years

– Justine considers herself to be risk averse

Task: 2

Assess the objective of repaying the car loan within 3 years (assume the interest rate is 8%)

Discuss the scope to establish a savings plan to enable Justine to take leave of absence from her job to work overseas as a volunteer in a refugee camp for a period of one year (assume the required savings goal is AUD38,000 and an interest rate on savings of 5%)

Justine holds a well paid job that offers good career progression. She is relatively young and has many years remaining in the work force until retirement. Her salary should steadily increase with time and the amount of surplus money should also increase.Outline the types of investments she should consider for the allocation of surplus money

Justine has received an investment proposal to purchase some corporate bonds. The bonds are currently trading in the market at AUD925 per bond. The bonds have a remaining term of 7 years, pay a coupon of 6% (semi annually) and have a face value of AUD1000. Similar risk bonds have a yield of 9%. Review this proposal and make a recommendation to Just

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