Summative Finance Assignment

Assignment Requirements

 

Hi, i will send you the assignment in a word document in attachment and the instructions are really clear in there what to put what to do. PLEASE follow each step and read carefully don’t miss anything! For my job i want to be a surgeon in the future so try to research that and the other stuff is in the word document which will show which websites to go and what to do with those. It is a grade 11 Functions project but its about financing so therefore the subject are is finance. You have to use compound interest formulas, annuities so its simple so don’t use any different math equations to find out how much money can you give to buy a house for instance. It is a really important assignment so please please i need your help and don’t forget to important part where it says my salary rises up 2.5% every year and so on. If you just look at the word document carefully and don’t miss anything you will be fine. I need to get a good grade, so it is kind of planing my future finance assignment. Hopefully you will understand it and if you have any other questions please ASK me because i want this assignment to be perfect.

MCR3U                                  Life Finance Summative Assignment                                                   May 2014

CONGRATULATIONS!!!  You have earned a ticket to preview your financial future…have a great time! Keep in mind that realism will be a factor in how this is graded. It will also make this a more useful exercise for you later in life!
Note: You will not be able to complete ALL of your calculations until we’re close to finishing Chapter 7, but you should do all the research, writing, and calculations that you are able to complete in good time so as to not be overwhelmed close to the end of the project.
a) You graduated from Post Secondary education five years ago (2009). It took you a while to get started but you now have three years experience in the field of your choice (You started at an entry level job in your field and received a 2.5% raise to date each year).

 

Go do some research on the career you would like to model for this project (What you might be interested in becoming one day), and complete a write-up providing details as follows:

• What career have you chosen?
• Research and find what your approximate annual starting salary would have been and what you would currently earn (gross salary).
• You have deductions that must be taken off your salary (EI, Income tax, etc). If you earn under $42 000, your deductions total 25% of your income. If you earn between $42 000 – $83 000, your deductions total 35%. If you earn between $83 000 – $129 000, your deductions total 40%. If you earn more than $129000, your deductions total 45%. Calculate your net annual and net monthly salary.

b) You have accumulated some student debt that you now need to begin paying off. To determine the amount of your debt, multiply the number of years of post secondary education by $3000.
c) When constructing a budget, there are recommended percentages that you should spend on several categories (Housing, Transportation, Debt repayment, Life, Savings, Other).

 

Many financial advisors recommend a 50/20/30 split. (Shin, Laura. http://www.learnvest.com/knowledge-center/your-ultimate-budget-guideline-the-502030-rule/)

• 50% of your income goes towards Essentials (housing (including mortgage), transportation, utilities, groceries.)
• 20% towards financial priorities (debt payments, retirement savings, child education savings, etc.)
• 30% towards Lifestyle choices (phone, cable, entertainment, travel, clothing, child care, hobbies, charitable giving, etc.)

 

Complete a table (maybe an Excel Spreadsheet) showing your gross monthly salary, net monthly salary (after deductions), expense categories and amounts, and the additional categories you may have added. Determine whether you have any spare money left over.
The following sections serve as a guide:
 

 

ESSENTIALS

 

HOUSING
Some expenses besides a mortgage that would be classified under the Housing section of your budget are:

• Property taxes
• House Insurance
• General Maintenance and upkeep
• Hydro, Gas, Sewer/Water bills

Consider the following:

1. Research approximate costs for the above factors in the area of your choice.
2. Using www.mls.ca, choose a house that you believe you can afford (assuming that you are sharing the housing cost equally with another person who earns exactly the same money as you and will contribute equally to all housing costs).
3. What size of down payment would you need in order to avoid paying any CMHC fees?
4. Assuming that your parents gave you a gift of the down payment (this is a very generous gift…perhaps you shouldn’t expect this!), use a posted 5-year interest rate from a major Canadian bank to determine if the two of you can afford the house on your combined budget.
5. If you can’t afford it, are there things that you could do/change in some of the other categories in order to be able to afford it? Do you think this would be beneficial?

 

TRANSPORTATION
Consider the following – assuming that you can’t just take public transit everywhere and you need to buy a car.

1. According to your budget how much can you afford to pay each month for transportation?
2. What other costs need to be factored in here besides the cost of the car? Are there things that your parents pay for now that you don’t? Do you also need a monthly bus/train/subway pass?
3. Research approximate costs of these factors and assume you need to fill the car up with gas approximately once each week. How much will you have left to make a monthly car payment? What type of car can you afford? Justify your answer mathematically.

 

 

FINANCIAL PRIORITIES

DEBT
Consider the following:

1. According to your budget how much can you afford to pay each month on your student loan debt?
2. What interest rate is charged on the federal portion of an OSAP loan (Research)?
3. Assuming that your loan acts like an annuity, how long will it take for you to pay off your debt?

 

 

SAVINGS
Consider the following:

1. According to your budget, how much money should you contribute to your savings?
2. If you invest this amount each month in an account that will pay an average of 6% interest over the next 40 years, how much will you have in this account when you are ready to retire?
3. Decide whether you think this amount will be enough. What other choices or options do you have to build up retirement savings and live comfortably in your old age?

 

LIFESTYLE

Consider the following:

1. According to your budget, how much money should you have to use for your “life”?
2. What types of things do you need to be able to pay for with this category?
3. In the above identified items, decide which are necessities and which are luxuries.

Response Questions

1. How much time did you spend doing research?
2. What “surprised” you in doing this project?
3. Was there any information that you ignored in order to simplify your work?
4. Where there any assumptions, or additional considerations, that you made that were not included in the assignment? If so, what were they?

Consider also factors such as vacations, starting a family (and the impact both from additional possible expenses and potential loss of income from one of you taking a break from working), and any other ‘life’ factors you may want to include.

You will complete a Word document detailing all of your writing and calculations regarding the above. Make sure to make use of tables, pictures, etc. to make your document look attractive – You may want to hand this over to your potential future spouse to show them how organized, and what a great planner, you are!

Marking Scheme

Use of Planning Skills

• Find the relevant information                         4          3          2          1
  • Proper tax bracket
  • CHMC fee
  • OSAP Interest rate
  • Appropriate budget %

 

Use of Processing Skills

• Thoroughness of work in each section                        4          3          2          1
  • Calculations
  • Relevant explanation
• Thoroughness of response questions               4          3          2          1

 

Critical/Creative Thinking Processes                                  4          3          2          1

• Realistic approach to the project
• Creativity

 

Thoroughness in approaching project and             4          3          2          1

considering all potential impacting factors

 

Total: 20 Marks

 

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