Requirements report should be on 8 by 10 paper with your name in the upper right corner and stapled. There are 10 pages to the exam including the cover page. The report can be any length and for qualitative answers double spaced in 12 point font. Several questions require charts. Answer the 10 required questions (see following) Only paper copies will be accepted.

Client Demographics Husband currently earns $100,000 annually, now age 30 Wife currently earns $50,000 annually, now age 30 Both expect raises of 2% until they retire They have two children below age 5 Both want to retire at age 65 Inflation is expected to be 2% forever They are balanced investors and expect to earn 6% will working and 5% in retirement They both expect to live until age 95 They feel they will need 80% of their final year’s salary in retirement Their income in retirement should be inflation protected Husband average tax rate while working 25%, while retired 29% Wife average tax rate while working 17%, while retired 21% Combined tax rate while working 22.3%, while retired 26.3%

Cash Flows Today Income Husband Income Wife Taxes 100,000 50,000 ? Expenses: Food Canada pension & unemployment insurance Clothing Housing utilities Maintenance Debt payments Gas for cars Education for kids (savings are after tax) Personal care Gifts and donations Entertainment Property taxes 10,000 6,000 3,000 2,000 4,000 9,000 5,000

Net Worth Today Assets: Liabilities: Cash chequing $10,000 Cash savings $15,000 Bonds $150,000 Stocks $100,000 RRSPs* $240,000 Homes $285,000 Car $26,500 Furniture $36,500 Personal $24,000 * In a balanced fund Credit cards $15,000 Personal loans $10,000 Car loans $10,000 Mortgage $200,000 Taxes $33,500

Debt Payment Assumptions Annual Payment ? (PMT) Interest (I) Original Loan (PV) End (FV) Term (N) Mortgage 3 -300000 25 Car loan 5 -40000 Credit card* 28 -15000 15000 rolls Personal loan 6 -10000 Taxes 33500 -33500 1 * Pays interest only right now

Other Information The clients want to buy term life insurance in case either passes. The term insurance will be bought based on today’s net worth and cash flows. The clients have disability and heath care insurance through their employers and through age 65. Canada Pension and Old Age Security are $25,000 today for these clients and will grow to $50,000 at retirement. Their companies will pay 4% of their salaries into RRSPs for their account. There are no other company pension plans. Investment returns, for the long term, are expected to be: Equities 8% Bonds 5% Cash 2% State any other assumptions you make in your analysis. These are your option and may be necessary to complete the assignments.

The clients prefer a balanced portfolio Your Risk Tolerance (note: will likely change over time) Survey Score  5 4 3 2 1 Mix: Ultra Conservative Conservative Balanced* Aggressive Ultra Aggressive Cash 15% 10% 5% 0% Fixed income (Bonds) 75% 60% 45% 25% Equity 30% 50% 70% 90% * Note this is a guideline. Your may actually be in a range around these percentages to achieve the clients return goals. Thus, you would explain to the client if they are trending toward Conservative or Aggressive so they know.

Debt Management Statistics % Good or Bad? Emergency Fund Liquid Assets / Monthly Expenses Liquidity Liquid Assets / Total Assets Investments Investment Assets / Net Worth Debt Ratio 1 Debt to Total Assets Debt Ratio 2 Debt to Net Worth Mortgage Loan to Value Gross Debt Service (Mortgage + Utilities + Property Taxes) / Gross Income Total Debt Service (Mortgage + Utilities + Property Taxes + Other Debt) / Gross Income

Final Exam Questions – 10 marks each Prepare a cash flow statement showing discretionary and non-discretionary items. Prepare a net worth statement. Prepare a retirement plan indicating their combined savings requirements. Assess whether the clients can meet the savings plan targets currently. Given available savings options, how should they save for retirement? What plans and how much? Prepare a financial debt management schedule. Do they have enough funds for emergencies? Is any planning required here? What asset class mix would you recommend while working and in retirement to achieve investment return goals? What term insurance level (amount) should the clients buy? What are 5 financial planning items should the clients consider?