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.

Chris:

• Is an experienced Project Engineer and is employed by one of the largest engineering consulting firms in Australia. The job security is high. However, the scope for further career advancement is not good Chris enjoys the technical aspects of engineering and has little interest in promotion to a management role.
• Chris works regular hours and the occasional weekend. Chris is a keen cyclist and and likes to spend much of any free time riding with friends.
• Chris rents a studio apartment but would like to purchase an apartment within the next five years.
• Chris has a good understanding of financial markets and is familiar with risk and return.
• Both personally and financially, Chris is considered to be a risk taker.

Kit and Jo:

• Kit and Jo have been together for nearly 15 years and have two young children. Kit is a partner at a major accounting firm and Jo is a senior biochemist at a pharmaceuticals company. They both work long hours and hire home help for cleaning and cooking.
• Family is their top priority and they work hard to ensure that their family and work life is balanced and comfortable. The children are settled and happy at a local state school.
• Kit and Jo are concerned that the family home is too small the children will need more space in the near future. They are investigating two options sell the home and buy a larger property, or, keep the home and build a major extension.
• Recently, an elderly family relative of Kit died. This relative was wealthy and Kit will receive a substantial payment from the estate. But the exact amount is not known at the present time.
• Both Kit and Jo 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.

Jim:

• Jim is a retired doctor. He was married for 25 years until his wife died about two years ago. He now lives alone. Financially, Jim is comfortable in retirement largely as a result of following a financial plan as a married couple for many years.
• Jim is active, in good health and helps out as a volunteer in several community activities.
• Jim is interested in scuba diving and likes to visit famous reefs and shipwrecks. Many of these sites are overseas. Ideally, he would like to undertake an overseas holiday each year.
• Jim is conservative by nature even more so since retiring and losing his wife. He has no interest in risky investments.

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Questions and Answers: around 200 words for each answer

• Discuss the key factors that Chris should take into consideration for his financial plan in purchasing an apartment within five years (price approx AUD0.7 million) with 20% cash and 80% bank loan and the allocation of savings. In your response make specific references to the case information.
• Chris is considering purchasing some shares in the company he works for. The company is listed on ASX and has a current share price of AUD3.50. Earnings in 20X2 were AUD0.35 per share and in 20X1 were AUD0.30 per share. The average PE (based upon projected earnings for 20X3) for similar companies is 11.5. Review this potential investment by Chris and prepare a recommendation.
• Discuss the scope to establish a savings plan to enable Chris to take leave of absence from his job to work overseas as a volunteer in a refugee camp for a period of one year (assume the required savings goal is AUD38,000 and an interest rate on savings of 5%)
• Chris holds a well paid job. He is relatively young and has many years remaining in the work force until retirement. His salary should steadily increase with time but he has no interest in management role promotion so the amount of surplus money might not increase. Outline the types of investments he should consider for the allocation of surplus money.
• Chris has received an investment proposal to purchase some corporate bonds. The bonds are currently trading in the market at AUD925 per bond. The bonds have a remaining term of 7 years, pay a coupon of 6% (semi annually) and have a face value of AUD1000. Similar risk bonds have a yield of 9%. Review this proposal and make a recommendation to Chris.
• Advice Kit and Jo on selling their current home and buy a larger property or keeping it and build a major extension.
• Advice Kit and Jo on operating a conservative budget until the children complete high school in about 10 years time.
• Discuss how Jim can use insurance to protect his home against key risks.

You work as a Financial Planning Adviser and have been asked to assist with three new clients. You have received background information on each client (see below). Client Name Chris Kit and Jo Jim 40 and 42 Married, home owners 71 Widower (single), home owner Nil Age 29 Status Single, renter of Studio apartment Dependents Nil Occupation Engineer Net Income AUD115,000 pa from salary (after super and after tax) Expenses AUD85,000 pa including (living and paying rent for the Studio financial) apartment Major assets Cash at bank AUD15,000 Superannuation AUD120,000 Two children (age 6 and 8) Accountant and Biochemist AUD150,000 pa (Kit) and AUD120,000 pa (Jo) from salary Retired Doctor AUD85,000 pa total from retirement fund and investment portfolio of bonds and shares AUD175,000 pa including the home loan AUD55,000 pa Cash at bank AUD75,000 Superannuation AUD250,000 Home AUD1.8 million Car AUD25,000 Cash at bank AUD30,000 Superannuation AUD1.8 million Home AUD1.5 million Investment portfolio AUD250,000 Car AUD50,000 Nil Nil Major liabilities Major financial goals Purchase an apartment within five years (price approx AUDO.7 million) with 20% cash and 80% bank loan Home loan AUD1.2 million (interest only loan) Operate a conservative budget until the children complete high school in about 10 years time Continue self funded retirement and undertake one overseas holiday each year (approx cost AUD30,000 per holiday additional to normal expenses) 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