You are a financial advisor working in Scarborough, Ontario. One day, you get a phone call...
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You are a financial advisor working in Scarborough, Ontario. One day, you get a phone call from Priya Patel and you arrange a first meeting with her. You find out that she is a referral from one of your existing clients, Vivek Singh. Apparently, Priya received some inheritance money from her grandfather and needs some advice on what to how to best advice with the money. At the initial meeting, you find out the following: Priya is single, 42 years old and lives in Pickering Ontario. She works full-time for Manulife Financial and earns $ 80,000 annually. She does not have a registered Retirement Savings Plan (RRSP) or a Tax Free Savings Account (TFSA). She lives in her condo which is now fully paid... this is the reason she does not have an RRSP or a TFSA yet. Priya recently inherited $100,000. She is asking your advice if this money should be placed as a split between an RRSP and a TFSA account. Or should she put all the money in one of these accounts. Finally, she I wondering if she should be doing something else with the money. REQUIRED: Show all your work and state all your assumptions. 1. Make an argument on why Priya should consider investing her inheritance money in an RRSP account. Explain in simple terms the major advantages and disadvantages of this approach (5 marks) 2. Make an argument on why Priya should consider investing her inheritance money in a TFSA account. Explain in simple terms the major advantages and disadvantages of this approach (5 marks) 3. What is your final recommendation to Priya given her personal circumstances. State all your assumptions. (2 marks) Chris, 33 years old and Marina Michael, 31 years old are a happily married couple and living in Pickering, Ontario. They are currently renting a house paying $3,000 per month. One of their important financial goals is to save enough money for a down payment and purchase their own home. Chris is a manager at Canadian Tire earning $ 85,000 gross and Marina works for the federal government earning $ 75,000 gross annually. They have two children, a son Andreas, 4 years old and a daughter Sophia who is currently 18 months old. Chris and Marina would like to save money for their children's post-secondary education. They believe, generally speaking, educated people with a post-secondary degree do better in life that those without one. However, they are very concerned with the rising tuition and education costs in Ontario. They estimate the total cost of post- secondary education is $ 12,000 per year...or $ 48,000 for a 4-year program at a College or University. While inflation for goods and services hovers now around 3 %, the cost of education seems to be increasing at a higher rate of about 7 %. They heard from friends that they should consider setting up an RESP account to help them save for their children education. They were told that the government subsidized this program with thousands of dollars in grants. They would like to learn more about this program, and they came to you for advice. One of the questions they have is what would happen to the RESP money if one of their kids or even both of them do not go to College or University. They currently receive the Canada Child Benefit (CCB) from the government - about $ 6,600 annually - which they would like to deposit into an RESP. They also tell you that they have already saved $10,000 for their kid's education. education ... these money are earning 0.1% in a savings account with TD Canada Trust. They would like your recommendations on how to access the grants provided by the government. Lastly, they would like to make deposits into the RESP only as long as they are receiving grants from the government. Marina's sister Georgia works for TD Canada Trust. Over coffee, she mentions to Marina that the government introduced a new savings plan designed to help families own their first home. The new savings plan is called the First Home Savings account (FHSA). REQUIRED: Show all your work and state any assumptions. 1. Explain in simple terms the most important features/benefits (5 items) of the First Home Savings account (FHSA). (5 marks) 2. What are the top two reasons on why the Michaels should start investing in a Registered Education Savings Plan (RESP). (2 marks) 2. Calculate the total cost of education for Andreas and Sophia when they go to school (3 marks) 4. Project the total amount to be accumulated in the RESP account. Show funds deposited, grants received, and income generated annually. It is suggested that you use a table to show your projections. (5 marks) 5. What is the gap, if any, between projected cost and projected RESP account value? What are your recommendations on what they should do to eliminate this shortfall 2 (3 marks) You are a financial advisor working in Scarborough, Ontario. One day, you get a phone call from Priya Patel and you arrange a first meeting with her. You find out that she is a referral from one of your existing clients, Vivek Singh. Apparently, Priya received some inheritance money from her grandfather and needs some advice on what to how to best advice with the money. At the initial meeting, you find out the following: Priya is single, 42 years old and lives in Pickering Ontario. She works full-time for Manulife Financial and earns $ 80,000 annually. She does not have a registered Retirement Savings Plan (RRSP) or a Tax Free Savings Account (TFSA). She lives in her condo which is now fully paid... this is the reason she does not have an RRSP or a TFSA yet. Priya recently inherited $100,000. She is asking your advice if this money should be placed as a split between an RRSP and a TFSA account. Or should she put all the money in one of these accounts. Finally, she I wondering if she should be doing something else with the money. REQUIRED: Show all your work and state all your assumptions. 1. Make an argument on why Priya should consider investing her inheritance money in an RRSP account. Explain in simple terms the major advantages and disadvantages of this approach (5 marks) 2. Make an argument on why Priya should consider investing her inheritance money in a TFSA account. Explain in simple terms the major advantages and disadvantages of this approach (5 marks) 3. What is your final recommendation to Priya given her personal circumstances. State all your assumptions. (2 marks) Chris, 33 years old and Marina Michael, 31 years old are a happily married couple and living in Pickering, Ontario. They are currently renting a house paying $3,000 per month. One of their important financial goals is to save enough money for a down payment and purchase their own home. Chris is a manager at Canadian Tire earning $ 85,000 gross and Marina works for the federal government earning $ 75,000 gross annually. They have two children, a son Andreas, 4 years old and a daughter Sophia who is currently 18 months old. Chris and Marina would like to save money for their children's post-secondary education. They believe, generally speaking, educated people with a post-secondary degree do better in life that those without one. However, they are very concerned with the rising tuition and education costs in Ontario. They estimate the total cost of post- secondary education is $ 12,000 per year...or $ 48,000 for a 4-year program at a College or University. While inflation for goods and services hovers now around 3 %, the cost of education seems to be increasing at a higher rate of about 7 %. They heard from friends that they should consider setting up an RESP account to help them save for their children education. They were told that the government subsidized this program with thousands of dollars in grants. They would like to learn more about this program, and they came to you for advice. One of the questions they have is what would happen to the RESP money if one of their kids or even both of them do not go to College or University. They currently receive the Canada Child Benefit (CCB) from the government - about $ 6,600 annually - which they would like to deposit into an RESP. They also tell you that they have already saved $10,000 for their kid's education. education ... these money are earning 0.1% in a savings account with TD Canada Trust. They would like your recommendations on how to access the grants provided by the government. Lastly, they would like to make deposits into the RESP only as long as they are receiving grants from the government. Marina's sister Georgia works for TD Canada Trust. Over coffee, she mentions to Marina that the government introduced a new savings plan designed to help families own their first home. The new savings plan is called the First Home Savings account (FHSA). REQUIRED: Show all your work and state any assumptions. 1. Explain in simple terms the most important features/benefits (5 items) of the First Home Savings account (FHSA). (5 marks) 2. What are the top two reasons on why the Michaels should start investing in a Registered Education Savings Plan (RESP). (2 marks) 2. Calculate the total cost of education for Andreas and Sophia when they go to school (3 marks) 4. Project the total amount to be accumulated in the RESP account. Show funds deposited, grants received, and income generated annually. It is suggested that you use a table to show your projections. (5 marks) 5. What is the gap, if any, between projected cost and projected RESP account value? What are your recommendations on what they should do to eliminate this shortfall 2 (3 marks)
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ISBN: 978-9386873248
8th edition
Authors: Arnold J. R. Tony, Gatewood Ann K., M. Clive Lloyd N. Chapman Stephen
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