Question 2.c (5 marks)

The business that Clare manages has performed above expectations over the previous 12 months and the owner of the business has decided to pay Clare a bonus of AUD30,000 (after tax). Clare is very pleased with this result but is not sure what to do with the money.

Clare and Alan are considering four alternatives:

- increase superannuation

- reduce the home loan balance

- establish an investment portfolio

- take the family on an overseas holiday

Briefly discuss and compare the advantages and disadvantages of these four alternatives. Taking into account their financial and family circumstances, make a recommendation for Clare and Alan to consider (make sure you state the reasons). (5 marks)