FIN3001EF Personal Financial Planning Review Exercise

Document Sample
FIN3001EF Personal Financial Planning Review Exercise Powered By Docstoc
					                        Course: FIN3001EF Personal Financial Planning

                                         Review Exercise

Short Questions:

1. State 4 advantages of personal financial planning.

2. What are the steps involved in the financial planning process?

3. What are the purposes of personal financial statement?

4. Which 4 budget systems are common to use?

5. What are the two basic types of credit? Give an example for each.

6. What is consumer credit?

7. What are the Five Cs of Credit?

8. What are the danger signals to show you are in debt problems ?

9. State 4 types of health care coverages?

10. What is the whole life policy and one of policy options given?

11. What is the definition of life insurance, and the purpose of the life insurance?

12. Explain what role(s) are you playing in the investment process?

13. What is the difference between straight-life annuity and joint-and-survivor annuity?

14. What are the ways to manage risk?

15. What are the 5 components of risk factor?

16. What is the difference between Pure Risk and Speculative Risk?

17. How does tax avoidance differ from tax evasion?

18. What are the characters of taxation system in Hong Kong?

19. What is the different between the guardian and trustee?
20. What are the responsibilities of an Executor?
Financial Problems:

1. Use the items in the following table to calculate the ratios required:

        Liabilities                                $12,000
        Liquid assets                              $2,200
        Monthly credit payments                    $150
        Monthly savings                            $130
        Net worth                                  $36,000
        Current liabilities                        $550
        Take-home pay                              $900
        Gross income                               $1,500
        Monthly expenses                           $850

    Debt ratio:
    Current ratio:
    Debt-payment ratio:
    Saving ratio:
    Liquid ratio:

2. Use the following items to prepare a balance sheet and a cash flow statement. Determine
   the total assets, total liabilities, net worth, total cash inflows, and total cash outflows.

        Rent for the month, $650                       Monthly take-home salary, $1,950
        Cash in checking account, $450                 Savings account balance, $1,890
        Spending for food, $345                        Balance of educational loan, $2,160
        Current value of automobile, $7,800            Telephone bill paid for month, $65
        Credit card balance, $235                      Loan payment, $80
        Auto insurance, $230                           Household possessions, $3,400
        Stereo equipment, $2,350                       Payment for electricity, $90
        Lunches/parking at work, $180                  Donations to church, $70
        Home computer, $1,500                          Value of stock investment, $860
        Clothing purchase, $110                        Restaurant spending, $130

   Total assets =
   Total liabilities =
   Net worth =
   Total cash inflows =
   Total cash outflows =
3. Based on the following data, calculate the ratios requested:

      Net worth $48,000                  Take-home pay $2,600
      Gross income $2,850                Current liabilities $950
      Monthly credit payments $540       Liquid assets $5,200
      Liabilities $7,000                 Monthly savings $180

       i. Debt ratio:

       ii. Current ratio:

      iii. Debt-payment ratio:

      iv. Saving ratio:

4. Based on the following data, calculate the ratios requested:

      Long-term liabilities $854,321     Net worth $1,448,000
      Liquid assets $55,200              Current liabilities $45,650
      Mortgage repayment $84,000         Mortgage loan outstanding $555,234
      Credit card repayments $5,540      MPF $12,000
      Interest earned on savings $150    Gross income $281,850
      Car loan repayment $38,087         Property market value $685,483

i.     Debt-payment ratio:

ii.    Debt-to-equity ratio:

5. What would be the 6-month’s interest earnings for a person who deposits $2,000 monthly in
      savings at an annual interest rate of 5.5 percent?

6. If a person spends $100 a week on coffee (assume $5,200 a year), what would be the future
      value of that amount over 3 years if the funds were deposited into his savings account
      earning interest of 4 percent per annum (interest will be paid twice a year in 6th and 12th

7. You plan to open a fast food shop after 3 years and $150,000 of capital is required. You
      decide to deposit a lump sum of money into a time deposit with every 3-month's renewal.
      The interest rate is 3.5%p.a. How much the lump sum of money does you need to deposit?

Shared By: