Question 1.b (5 marks) Marion no longer needs a large house and has decided to sell the property and to purchase a townhouse. The expected proceeds from the sale of the large house is AUDZ.S million. From these proceeds, AUD1.1 million will be used to fund the purchase of the townhouse, AUD1.0 million will be added to the superannuation fund and the balance of AUDO.4 million will be used to establish an investment portfolio comprising Australian govemment bonds and ASX listed shares. Describe and compare the key features in general of bonds and shares as investment securities. In your response make sure you compare returns and risks for these two types of asset classes (3 marks) Make a recommendation on how much should be allocated to bonds and how much should be allocated to shares. In your response make sure you take into account the specific circumstances of Marion and clearly set out the reasons for the recommendation (2 marks) ABUIA 9- 8 3 O I A (Alt+Q) AaBbCcD AaBbCcD AaBb AaBbC AaBbC AaBbC AaBbCcD. AaBbC JIEX 1 2 5 Marion: Marion is a retired musician. She divorced about two years ago and now lives alone. Financially, Marion is comfortable in retirement - largely as a result of following a financial plan for many years. Marion is active, in good health and is a volunteer at the local primary school where she helps children with learning difficulties. Marion does not have children. She is family oriented and regularly communicates with her sisters that live in Portugal. Marion is conservative by nature and has no interest in risky investments. Fiona and Waleed: Fiona and Waleed enjoy being parents and are devoted to their child. Both are currently working but arrangements have been made for Waleed to take extended leave of absence from his work for 24 months to look after the child. Their apartment is small but is adequate at the moment. They recognize the need for more space as the child matures. Also, although they have no immediate plans, it is possible they might decide to have another child in the future. Both Fiona and Waleed are well educated, financially literate and consider themselves to be risk takers - they assess each opportunity on its merits. But they would never place in jeopardy their family or their family wealth. 000000000 I v3.docx B (Alt+Q) AaBbCcD AaBbCcD AaBb AaBbC AaBbC AaBbC AaBbCcD. AaBbC TEX + 1 2 V 15 You work as a Financial Planning Adviser and have been asked to assist with two new clients. You have received background information on each client (see below). Client Name Marion Fiona and Waleed P 2 43 Age+ 65+ 35 and 33 4 Status Single, owner of large house Married, joint owners of small apartment e Dependents Nile One child (age 2) Occupation Retired musician Pharmacist (Fiona) and Chemical Engineer (Waleed) 4 Net Income AUD75,000 pa from (after super and after tax) superannuation AUD150,000 pa (Fiona) and AUD125,000 pa (Waleed) from salary Expenses + AUD65,000 pa AUD145,000 pa including the bank loan (living and financial) Major assets Cash at bank AUD25,000 Cash at bank AUD10,000 Superannuation AUD600,000+ House AUD2.5 million Superannuation AUD350,000+ Apartment AUDO.8 million e 2 Major liabilities Nile Bank loan for the apartment AUDO.6 million (interest only loan) 4 Major financial goals Continue self funded retirement Purchase a house in the future e 2 You have had an introductory meeting with each new client to obtain a better understanding of their circumstances, financial goals and risk preferences. Below are some notes from those meetings. E I A e Question 1.b (5 marks) Marion no longer needs a large house and has decided to sell the property and to purchase a townhouse. The expected proceeds from the sale of the large house is AUDZ.S million. From these proceeds, AUD1.1 million will be used to fund the purchase of the townhouse, AUD1.0 million will be added to the superannuation fund and the balance of AUDO.4 million will be used to establish an investment portfolio comprising Australian govemment bonds and ASX listed shares. Describe and compare the key features in general of bonds and shares as investment securities. In your response make sure you compare returns and risks for these two types of asset classes (3 marks) Make a recommendation on how much should be allocated to bonds and how much should be allocated to shares. In your response make sure you take into account the specific circumstances of Marion and clearly set out the reasons for the recommendation (2 marks) ABUIA 9- 8 3 O I A (Alt+Q) AaBbCcD AaBbCcD AaBb AaBbC AaBbC AaBbC AaBbCcD. AaBbC JIEX 1 2 5 Marion: Marion is a retired musician. She divorced about two years ago and now lives alone. Financially, Marion is comfortable in retirement - largely as a result of following a financial plan for many years. Marion is active, in good health and is a volunteer at the local primary school where she helps children with learning difficulties. Marion does not have children. She is family oriented and regularly communicates with her sisters that live in Portugal. Marion is conservative by nature and has no interest in risky investments. Fiona and Waleed: Fiona and Waleed enjoy being parents and are devoted to their child. Both are currently working but arrangements have been made for Waleed to take extended leave of absence from his work for 24 months to look after the child. Their apartment is small but is adequate at the moment. They recognize the need for more space as the child matures. Also, although they have no immediate plans, it is possible they might decide to have another child in the future. Both Fiona and Waleed are well educated, financially literate and consider themselves to be risk takers - they assess each opportunity on its merits. But they would never place in jeopardy their family or their family wealth. 000000000 I v3.docx B (Alt+Q) AaBbCcD AaBbCcD AaBb AaBbC AaBbC AaBbC AaBbCcD. AaBbC TEX + 1 2 V 15 You work as a Financial Planning Adviser and have been asked to assist with two new clients. You have received background information on each client (see below). Client Name Marion Fiona and Waleed P 2 43 Age+ 65+ 35 and 33 4 Status Single, owner of large house Married, joint owners of small apartment e Dependents Nile One child (age 2) Occupation Retired musician Pharmacist (Fiona) and Chemical Engineer (Waleed) 4 Net Income AUD75,000 pa from (after super and after tax) superannuation AUD150,000 pa (Fiona) and AUD125,000 pa (Waleed) from salary Expenses + AUD65,000 pa AUD145,000 pa including the bank loan (living and financial) Major assets Cash at bank AUD25,000 Cash at bank AUD10,000 Superannuation AUD600,000+ House AUD2.5 million Superannuation AUD350,000+ Apartment AUDO.8 million e 2 Major liabilities Nile Bank loan for the apartment AUDO.6 million (interest only loan) 4 Major financial goals Continue self funded retirement Purchase a house in the future e 2 You have had an introductory meeting with each new client to obtain a better understanding of their circumstances, financial goals and risk preferences. Below are some notes from those meetings. E I A e