CASE STUDY

Case study

1)

Jeff RRSPs at the age of 75= 600,000(1+0.05)6 = $804,057

Sylvia's RRSPs be at age 71= 700,000(1+0.05)6= $ 938,067

2)

Most investors know the US Treasury and savings bonds. However, good additions to an investment portfolio are the obligations of the private sector. A sophisticated investor should become familiar with the three private sector bonds which are sponsored by the U.S. government. These are the FHLMC (Federal Home Loan Mortgage Corporation, also known as Freddie Mac, FNMA (Federal National Mortgage Association, also known as Fannie Mae and GNMA (Government National Mortgage Association) also known as Ginnie Mae. In general, private sector bonds offer a higher return than Treasury bills. However, this advantage is quickly blurred as they are more volatile than other bonds in that their price reacts to changes in borrowing rates. An investor receives profits when the mortgages that make up the group are paid. Investors can expect to pay a minimum of $ 25 000 for an obligation of the private sector. The types of asset mix recommended are as follows:

50% of their capital in bank accounts which gives a fix return annually and are risk free

25% of their capital in bonds which also gives a fixed return but greater than the bank return. This is because of the small amount of risk associated with bonds

Invest 25% of their capital in equities i.e. buying company shares. This gives a higher return more than bank and bond, but is fluctuating. The risk of equities is higher than bonds.

3) Jeff RRSPs

Year

Age on January 1

Balance

Annual Minimum Withdrawal

Percentage

Withdrawal Subjectto Minimum

2012

71

$600,000

$44,280

7.38%

$44,280

2013

72

$583,506

$43,646

7.48%

$43,646

2014

73

$566,853

$43,024

7.59%

$43,024

2015

74

$550,020

$42,407

7.71%

$42,407

2016

75

$532,994

$41,840

7.85%

$41,840

2017

76

$515,712

$41,205

7.99%

$41,205

2018

77

$498,232

$40,606

8.15%

$40,606

2019

78

$480,507

$40,026

8.33%

$40,026

2020

79

$462,505

$39,452

8.53%

$39,452

2021

80

$444,206

$38,868

8.75%

$38,868

2022

81

$425,605

$38,262

8.99%

$38,262

2023

82

$406,710

$37,702

9.27%

$37,702

Sylvia's RRSPs

Year

Age on January 1

Balance

Annual Minimum Withdrawal

Percentage

Withdrawal Subjectto Minimum

2012

71

$700,000

$51,660

7.38%

$51,660

2013

72

$680,757

$50,921

7.48%

$50,921

2014

73

$661,328

$50,195

7.59%

$50,195

2015

74

$641,690

$49,474

7.71%

$49,474

2016

75

$621,826

$48,813

7.85%

$48,813

2017

76

$601,664

$48,073

7.99%

$48,073

2018

77

$581,270

$47,374

8.15%

$47,374

2019

78

$560,592

$46,697

8.33%

$46,697

2020

79

$539,589

$46,027

8.53%

$46,027

2021

80

$518,240

$45,346

8.75%

$45,346

2022

81

$496,539

$44,639

8.99%

$44,639

2023

82

$474,495

$43,986

9.27%

$43,986

4)

Many financial advisors recommend that investors have a diversified portfolio consisting of bonds, shares and funds among others. Because bonds have a predictable flow of money and know the value of this at the end (which you will deliver to the investor at the end of the investment), many people invest in them to preserve capital and increase it or receive income Interest also people looking to save for the future of their children, their education, for new house, to increase the value of your pension or other number of reasons that have an objective financial, investing in bonds can help you achieve your goals.

Keys to choose the bonus that suits you best

There are many variables to consider in making the decision to invest in certain types of bonds: maturity, contracts, payment of interest, quality of credit, the rate of interest, price, yield, rates tax and taxes, etc. All these things help an investor to determine the type of bond that can fulfill their expectations and level of investment is sought in accordance with the objectives.

The interest rate

The interest paid by bonds may be fixed or variable (linked to an index like the DTF, LIBOR, etc). The period of time for payment is also different, may be payable monthly, quarterly, semi-annually or annually, which the most common forms of payment are. (It should be noted that interest in the vast majority of countries ...