Financial Planning for Study Material with Solved Assignments

This article discusses financial planning for study material with solved assignments. It covers topics such as budgeting, investment portfolios, and key financial ratios. It also includes answers to various questions related to retirement planning, insurance policies, and legal agreements. The article is relevant for students studying finance and related subjects.

Running head: FINANCIAL PLANNING
Financial Planning
Name of the student:
Name of the University:
Authors Note:

1FINANCIAL PLANNING
Table of Contents
Assignment 1..............................................................................................................................3
Answer To Question 1:..............................................................................................................3
(a)(i):......................................................................................................................................3
(a)(ii):.....................................................................................................................................3
(b)(i):......................................................................................................................................4
(b)(ii):.....................................................................................................................................4
(c):..........................................................................................................................................5
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................7
Answer questions 3b (i):........................................................................................................9
Answer questions 3b(ii):........................................................................................................9
Assignment 2............................................................................................................................10
Answer to Question 1...............................................................................................................10
Answer to Question 1(a):.....................................................................................................10
Answer to 1(b)(i):.................................................................................................................11
Answer to question 1(b)(ii):.................................................................................................11
Answer to question 1 C:.......................................................................................................12
Answer to question 1 (d):.....................................................................................................12
Question 2 (a):..........................................................................................................................13
Answer to Question 3:..............................................................................................................14

2FINANCIAL PLANNING
Answer to question 3(a):.....................................................................................................14
Answer to question 3(b):......................................................................................................14
Answer to Question 3 C:......................................................................................................14
Answer to question 3 d:........................................................................................................15
Reference..................................................................................................................................16

3FINANCIAL PLANNING
Assignment 1
Answer To Question 1:
(a)(i):
Mr T, a resident of Singapore, is engaged in the consultancy business. In addition to
that he has some other sources of income. All together the current investment and earning
capacity of the client is healthy. But the investment portfolios and the quantum of
expenditure are inadequate. The income form Royalty and Rental income are quite
substantial but the savings are not done properly, the budget is to be reviewed because to
increase the amount of savings (Kasuma et al., 2017). The potential needs of the asses to
review the budget as there are many deficiencies regarding the investment plan and the
margin or return. In the given case, Mr T has invested in much option from where income are
derived. However, the return in comparison of the investment are not adequate. The budget is
to review to diversify the investment and income generation.
(a)(ii):
Analysing the balance sheet of Mr T it is being identified that, major asset that Mr T
holds laid with the savings and retire fund. The other substantial portion of the assets are
located in two properties. For evaluating the position of the financial statement of an assesse
at first the liquidity is to be considered (Chwieroth, 2015). The liquidity is the ability to pay
certain debts or obligations. In the given case the Assesse liquidity is high as the investment
in the retirement fund and savings as well as fixed deposit investments are substantial to pay
the desired obligations.

4FINANCIAL PLANNING
(b)(i):
___“FALSE”____ A person’s investment assets to net worth ratio should logically decrease,
as he/she grows older.
_____“FALSE”_____ Cash management helps you to manage your cash on a day-to-day
basis; hence, it has no relation with long-term financial goals.
_____“TRUE”_____ The rule of “72” says that, at 10% interest, it takes a little more than 7
years to double your money.
_______“TRUE”___ Liabilities are normally reported at their current fair market value.
_____“TRUE”_____ If you can cut your spending by 5% that would be equivalent to getting
a 5% raise.
______“FALSE”____ When budgeting monthly income, you should exclude one-off items
such as a 3- month year-end bonus.
______“FALSE”____ When a person’s cash-flow statement shows a surplus, this means that
funds are ready to be used.
_____“TRUE”_____ No one financial ratio tells the whole story; hence, we need to look at a
few ratios to get an overall picture of an individual’s financial health.
(b)(ii):
Mr T can state the funds are adequate by calculating some key financial ratios. The
ratios provide some key beneficial analysis of the financial statements such as debt coverage,
current ratio, acid test ration, and others. The ratios depicts the financial viability of the
client. In case of any sudden needs of the assesse or any investment requirement for
speculative income or sudden requirement to pay off any emergency cost such as medical
expense or any kinds of loss the ability of the assesse is determined by current ratios and the

5FINANCIAL PLANNING
quick ratios. As this is the difference between the current assets and the current liabilities
(Deng, A., & Chen, 2017).
(c):
The two identified primary ratios are Debt Equity ratio, and Acid Test Ratio,
Debt equity ratio is the measure of the total debt of the assesse in comparison of the total
equity, this ratios shows the financial ability to repaid the dues and other obligations. The
Debt/ Equity will be favourable if it is more than 2. If is lower than 2, then the financial
viability will be considered as weak (Haldane, 2014).
Another key ratio is acid test ration, this is the measure of the short term loan or debt
payment ability. The Acid test ratio of quick ratio will be considered 3 to be good, higher will
be the value priories the financial position of the client.
Answer to question 2:
Question 2:a Penalty
Particulars 2016 2017
Due 5000 6000
Interest 5% ( 6 month) 250 300
additional ( 1 % per
month) 900 720
Total Penalty 1620
Question 2: b
(i)
Calculate for Mr T’s
Section 10(1)(b)
Particulars Amount
Annual Salary 120000
Leave Passage Allowance 9000
Taxable 9000
Question 2: b
(ii)
Calculate Mr T’s new
Section 10(1)(b)
2 return passages to UK 22000
Taxable 22000 22000

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Question 2: C
Compute Mr T’s tax liabilities for the Royalty
income.
Particulars Amounts Amount
Royalty Income 52520
Total Income 52520
Less: Expense
Printing Stationary 15500
Advertisement 8600
Legal Fee 2480 26580
Net Income 25940
Question 2: c
(ii)
Income Form Property for the Assessment year
2017
Particulars
Property
1
Property
2
Period of rental 12 12
Less: Vacancy 0 3
Period of rent 12 9
Monthly Rent 4500 3600
Gross Rent 54000 32400
Less: Property Tax 3960 2520
Net Rental Income 50040 29880
Deduction Allowed
Less: 15 % deemed
Rental Income 8100 4860
Taxable Income 41940 25020
Question 2: Calculation the amount of Share Option benefit assessable on Mr T.
Date
Option
Price
Market
Price
Number of
share
Tota
l
05-Oct-16 2.3 100000 0
12-Oct-17 2.3 3.5 100000
1200
00
19-Aug-17 3.5 5 100000
1500
00
Net Benefit
2700
00
answer
questions 3b(i) Retirement Benefits
particulars Amount

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Requirement
$
2,354,000
.00
Current Value
$ -
350,000.0
0
Annuity
$ -
26,000.00
Interest rate 8%
Period 15.00
Future value
$
1,816,214
.15
Inflation
$
3,667,455
.30
Monthly Pension
receivable
investment value
$
1,816,214
.15
Period 30
Rate 8%
Pension
-
110.2576
714
Answer to question 3:
1. When additional savings are needed to meet one’s retirement objectives, the
additional aggregate amount needed for one’s retirement fund should be based on
which of the following?
Answer:
B The future value of inflation-adjusted additional savings.

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2. The amount that must be saved annually for retirement would logically be reduced
by
Answer:
An increase in the rate of inflation
3. To calculate the future value of income-producing investments in the retirement
planning calculations, the most CORRECT interest factor to use is the
Answer:
Rate of return
4. Which of the following statements concerning inflation is/are CORRECT?
Answer:
C Both I and II
5. Which of the following are features of Supplementary Retirement Scheme?
Answer:
B I and II only.
6. The following statement(s) on the CPF is/are correct EXCEPT:
Answer:
A I only
7. Which of the following statement(s) about Eldershield and IDAPE is (are) TRUE?
Answer:
B I and III only.
8. When considering taking on an insurance policy for retirement purposes, which of
the following factors is most applicable?
Answer:
D All the above.

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Answer questions 3b (i):
The return of ten retirement fund at the end of the term is less than the desirable
amount because of the rate of inflation that is expected to grow 3% per Annam respectively.
The major difference that has occurred only because of inflation. The rate of interest has
affected the desired sum (Li et al., 2016).
Answer questions 3b(ii):
The expected income that T will received after the retirement is
Retirement Benefits
particulars
Requirement $ 23,54,000.00
Current Value $ -3,50,000.00
Annuity $ -26,000.00
Interest rate 0.08
Period 15.00
Future value $ 18,16,214.15
(c ):
The rate of inflation is decided by having the higher value as the rate in cumulatively
increased , the Future Value of the retirement fund is expected at the rate of 8% per Annum.
As the return on investment are low might affect in the following:
1. Low return: because of the inflation the return will be inadequate to met.

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2. Low Benefits: as the assured sum is assured and receivable at a future date then
the benefits that is desirable at the present time is higher than the future benefits.
3. Medical Allowance: as getting older attracts the medical expenses therefore the
future pensions are not considered to be effective to meet the medical cost.
4. The expectancy: the assesse expects to live for 90 years term and for that reason
Mr T is losing some substantial portion of the funds .
Assignment 2
Answer to Question 1
Answer to Question 1(a):
1. A I and II only.
2. C The insurer will reimburse the insured only to the extent of the insured’s financial
loss.
3. C Risk shifting or transfer
4. C They usually replace all of the disabled insured’s lost earnings
5. C Add an inflation protection rider.

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6. B Life annuity with refund features
7. A Insureds who discontinue their insurance contribute to a surplus fund
8. B Retiring an instalment debt obligation at death.
Answer to 1(b)(i):
Uberimmae Fidei: It as a legal agreement of the parties to the contract with the obligation to
perform the duties in good faith.
Uberimmae Fidei, is a Latin fords which signifies the ‘Utmost Good Faith’. the insurance
contracts are the example of the Uberimmae Fidei, contracts as the policy holder pays
insurance premium to the insurer for availing the risk share agreement among them self’s.
In insurance sector, the policyholder or the policy applicant knows more therefore the
policyholder must voluntarily disclose all the relevant facts for fixation of the premium by the
insurer. It is necessary for both the parities to the contract to provide the benefits and fulfilled
the desired obligations (Epstein, 2018).
Answer to question 1(b)(ii):
The main features of the Uberimmae Fidei are that all the parties to the contacts must
have initiated all the material facts that are require to be disclosed in good faith. This contract
bounds both the parties to the contract to perform the duties such as notifying the condition
and the profanities of the risk insured and the chances of getting affected reasons and others.

12FINANCIAL PLANNING
In case if the policyholder has not disclosed any material fact that is already known by
the holders and not disclosed to the insurer. In that case the insures has suffered loss for that
then in that case the insurer either deny the claim, and if the claim has already paid by the
insurer then in that case the insurer may sue the policy holder in fraud case and for damages.
Answer to question 1 C:
A waiver of premium is the premium that is paid by rider if the policy holder become
disabled. This is an optional benefit on many term life insurance policies and might be
available for on permanent forms of insurance coverage.
total permanent disability benefits means if the policy holder become permanently disable to
perform any work with Zero chances of curability then in that case the insurer take the
responsibility to provide the assured sum of living.
Answer to question 1 (d):
(i.) Contract a major illness:
The contract to major illness is the benefits if the insurance policy that will provide the
benefits of the plan in case of the policy holder gets affected by any critical illness.
The benefits that will be enjoyed by Poh Eng are:
Major Illness
Policy Sum Assured Benefits
5-year limited-premium whole life plan. 50000
Term plan with $500,000 Critical Illness benefit 500000
Total 550000

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(ii). If the policy holder pass away within the one year , then in that case the total amount of
maturity will be provided by the insurer to the nominee of the policy holder or the legal
relative.
Whole life policy
Policy Sum Assured Benefits
5-year limited-premium whole life plan. 70000
Term plan with $500,000 Critical Illness benefit 600000
Total 670000
Question 2 (a):
___ “TRUE _ The owner of a convertible bond has the option to become a shareholder.
___ “TRUE ___ The expected return of a portfolio return is a weighted average of the
component expected return.
___ “FALSE” ___ A large reverse split will reduce the number of shareholders.
____ “FALSE” __ A warrant gives its owner the right to sell shares back to the company at a
predetermined price.
__ “FALSE” ____ A retail food chain is a cyclic stock.
___ “TRUE ___ A forward PE is sometimes less than a trailing PE.
_____ “TRUE _ If a firm’s asset turnover increases, its return on assets also increases,
assuming everything else remains constant.

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__ “FALSE” ____ A stock that breaks through support level gives a bullish signal.
____ “FALSE” __ Increased margin buying has historically been associated with recently
rising markets. ____ “TRUE __ Small firms tend to outperform those with larger
capitalization.
Answer to Question 3:
Answer to question 3(a):
The statement does not hols good as the policy holder has the right to nominate the Nomee of
the policy independently. In that case the policy holder Poh Eng does not needs any written
representation to revoke the insurance nominations.
Answer to question 3(b):
i. The Special Needs Savings Scheme is the policy that the parents purchase for the
security of the special needs that the siblings will require for upbringing.
ii. Parents can increase the accumulation of the SNSS funds by increasing the amount of
systematic investment plan. Higher will be the sum assured the premium be increased
accordingly.
Answer to Question 3 C:
i. The CPF of central Provident Fund in the investment that the one employee makes
for the retirement benefits that will be enjoyed after the retirement when the policy
holder will not be able to earn, or might earn low income as compared to the needs.
Major portion of the funs swill be used to secure the needs of the retirement period, it
is advisable the 2/3 of the assets will be secured into CPF funds (Vernimmen et al.,
2014).

15FINANCIAL PLANNING
ii. Saving and security are the investment that one make to earn extra income for any
sudden future requirements. The investment in these funds will be not be huge or
minimal. If it will be beneficial to invest 16.67 % of the total assets in savings and
security.
iii. Insurance policy in the older age cost more as compared to earlier stages. In that case
a substantial portion of the funds are required to be allotted in case purchasing the
insurance policy or to pay off the Premiums.
Particulars Weight Amount
Available Funds 670000
CPF 0.666667 446666.7
Savings and share to charity 0.166667 111666.7
insurance policy 0.166667 111666.7
Total 1 670000
Answer to question 3 d:
From the above analysis it is advisable to Poh Eng can initiate that the major portion
of the available funds are to be secured for the payment of the loan outstanding of the
housing loans. The next step is to be invested for NSSS for securing the future of the
children. Additional investment are to be made in retirement or CPF funds for the retirement
benefits of the old mother of the Assesse.

16FINANCIAL PLANNING
Reference
Chwieroth, J. M. (2015). Managing and transforming policy stigmas in international finance:
Emerging markets and controlling capital inflows after the crisis. Review of
International Political Economy, 22(1), 44-76.
Deng, A., & Chen, Z. (2017). Managing Online Supply Chain finance Credit Risk of
“Asymmetric Information”. World Journal of Research and Review, 4, 29-32.
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and
measuring corporate social, environmental and economic impacts. Routledge.
Freeman, R. (2014). Managing open systems. Routledge.
Haldane, A. G. (2014). Managing global finance as a system. Bank of England, Speech at the
Maxwell Fry Annual Global Finance Lecture, Birmingham University, 29.
Kasuma, J., Said, S. S., Yacob, Y., Kassim, S. A., Sarkawi, I. M., & Shahrinaz, I. (2017).
Managing Risk, Networking and Managing Finance and the Successful of Sarawak
Bumiputera Entrepreneur. Advanced Science Letters, 23(8), 7557-7561.
Li, L., Liu, N., & Zheng, X. (2016). DOES THE PROVINCE-MANAGING-COUNTY
REFORM PROMOTE THE GROWTH OF COUNTY FINANCE AND ECONOMY
IN CHINA? AN EMPIRICAL CASE STUDY ON HENAN PROVINCE 1. Public
Finance and Management, 16(1), 25.
Vernimmen, P., Quiry, P., Dallocchio, M., Le Fur, Y., & Salvi, A. (2014). Corporate
finance: theory and practice. John Wiley & Sons.