ASSIGNMENT 1

Assignment 1

Part 1

Efficient Frontiers

Investment Policy Statement

The Investment plan identifies the present financial condition of the client and his plans for future achievements. Based upon the information we have received, a comprehensive Investment plan has been developed for the client who will provide guidance regarding his financial objectives.

The scope of the Investment plan is described below:

The income-expenditure analysis: This analyses the current income and expenses, investment and savings of the client.

Analysis of Goal: This identifies and analyses the needs for the client's financial objectives including goals related to the children.

Retirement planning: This analyses the client's post-retirement needs and an appropriate solution which addresses those requirements.

Insurance planning: This identifies the client's insurance requirements against possible risks.

Cash flow analysis: This gives a comprehension of future cash inflows and outflows at various stages, the client would undergo.

Assumptions

We have based our calculations on certain assumptions in the preparation of the client's Investment plan. These are described as follows:

The Investment plan and the different requirements are on the basis of the client's present financial situation.

The average inflation rate assumed is 8 percent per annum.

The expected growth in salary is assumed at an expected rate of 8 percent per annum.

The provident fund accumulation and the expected gratuity for the client have been calculated, assuming a growth of 8 percent per annum in the basic salary.

The client has retirement plans at the age of 60 years.

The annuity rate is assumed as 6 percent per annum.

The life expectancy for the client has been taken at an age of 80 years.

Financial Goals of the client

The client is considering the following financial goals in a specified time period:

Education of X: Yuet plans to send X into university. This would require a time period of 12 years. The cost for this would be around GBP 180,000. The inflation rate is assumed to be 8 percent. This goal has number one priority.

Education of Y: James plans to send Y into university. This would require a time period of 13 years. The cost for this plan would be around GBP 187500. The rate of inflation is assumed to be 8 percent and this goal has number two priority.

Purchase of property: Giorgio plans to acquire a larger property, due to the growth of his children as they would need more space. The time period for this goal would be three years. The cost of this would be around GBP 500,000. The inflation is assumed to be 8 percent per annum.

Identification and prioritisation of goals and the associated costs is the fundamental step in the achievement of a financially feasible future.

Inflation is an essential factor to comprehend. The cost of goods and services, have been on the rise over the past few years. Inflation reduces the purchasing power parity. Therefore, the client requires more finances in order to realise the goals.

Income and Expenditure Analysis

Income

Yuet primarily has two sources of consistent income. One source is that of his annual salary which amounts to GBP 70,000. A monthly breakdown of this would come to GBP 5833 ...