1. 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.

2. 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%

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

4. 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

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

6. 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.

7. 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.

8. 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

9. 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?