9.3 What type of credit facility best suits Justine's needs?

9.7 As a result of past unethical behaviour, financial institutions asking for guarantees must now obtain certification that the guarantor has accessed independent legal advice . Why is this necessary?

9. 9 If a person finds themselves in severe financial difficulties what are the alternatives to bankruptcy?

Max has 100,000 to invest. The ABC Bank is offering a 1 year term deposit which pays a simple annual rate of interest of 8%. Interest is compounded monthly. (from Q9.12)

Then, Max has decided to shop around for the best investment for his $100,000. The XYZ Bank is offering a 1 year term deposit which pays a simple annual rate of interest of 8%. Interest is compounded weekly.

9.13

a) What is the effective rate of interest?

b) How much will Max have in his account at the end of one year assuming he makes no withdrawals?

c) All other things being equal should Max deposit his money into ABC or XYZ?

d) When depositing money into an interest bearing account, does the investor prefer more or less frequent compounding?

9.18 Matthew needs a housing loan of $200,000. The ABC Bank quoted an effective annual rate of 8.3% compounded (reduced) monthly for a 20 year loan. An annual effective rate of 8.3% is equivalent to a monthly rate of 0.667%.

a) What will be the monthly repayment?

b) What will be the total repayments over the life of the loan?

9.19 Explain the difference between close-end credit with open-end credit. Provide an example for each type of credit.

Case Study

Dealing with debt (Financial planning 1st ed, p366-367)

Steve and Jenny come to you as their financial adviser. What advice can you give them on how to deal with their situation?