The Syed Family

Mr. Syed had recently called Raza and talked about how one of his neighbors was making good money investing in Pakistan Stock Exchange. He was wondering if this could be a good avenue of investment for accumulating his childrens education fund. Raza then met Mr. and Mrs. Syed, both government employees, whose major concern was to provide quality education to their 3 kids, aged seven, five and two. With the rising trend of private sector education systems, the couple was concerned about the immense costs attached with quality. Raza and Mr. and Mrs. Syed concluded that they should consider private schools for A-levels before they choose a suitable private university. Generally they expected their kids to start A-levels at the age of 16, followed by four years of university for an undergraduate degree. After doing a survey of schools in their vicinity, and calculating an annual increase of around 5% in fees, they estimated that A-levels expenses for their two older kids would be PKR 500,000 per year, and 4 years of university would cost PKR 1,000,000 per year; whereas for the youngest child, the costs would be 10% higher.

Mr. and Mrs. Syed knew that with their limited source of income, they would need to initiate a savings plan very soon. They intended to accumulate enough funds by the time the eldest child started A-levels. Raza began contemplating whether Mr. and Mrs. Syed should enter into a savings plan for 8 years for all 3 kids together, or a staggered plan for each child. A staggered plan would involve starting investments and accumulating funds for each child separately. Such plans can reduce the burden of cash outflows in the early years but would continue for a longer term until the needs for the youngest kids education started. Raza had talked to a bank about their saving plans and they had offered an interest rate of 8% on savings plans specifically designed for such purposes.

Dr. Fahad Mehmood

Dr. Fahad Mehmood, a 32-year old was working at a leading private university in the country. While he enjoyed his job, he was concerned about his post-retirement life since his private sector job did not offer housing or pension benefits. After much contemplation, he had approached Raza, a couple of weeks ago, for guidance on how to manage his finances. Dr. Fahad had always wished for early retirement in order to be able to spend some quality time with his family. He had recently inherited a small fortune, and his dream of retiring early seemed more achievable now. He planned to invest his money in relatively safe assets, so as to be able to have enough funds for a comfortable retirement. He was intrigued by his some of his friends boasting about fantastic returns they had recently made by investing in stocks. He was wondering how much of his fortune he should save and how much could be invested in suitable assets. In this regard, he had informed Raza during their meeting that he had ideally planned to work till the age of 50. Following retirement, he wanted to build a house in Rawalpindi, for which he has already made a down payment in Bahria Town worth PKR 5 million for 2 plots of 500 square yards each. He had to pay another PKR 8 million over the next 5 years in equal installments, and expected the construction of his house to cost around PKR 30 million at that time. Upon his retirement, he planned to sell 500 square yards of his land for PKR 15 million, and use the proceeds towards funding construction of his house.

Dr. Fahad had recently come across advertisements for increased profit rates offered through Behbood Certificates.

question: There are short cases given and you are basically supposed to make the financial plan, and write how much should they save or invest to meet the financing needs or goals they have set. The calculation/logic of the answers should be correct, little changes in answers would be acceptable if you have done the problem right