• B. Amanda, Fahad and their 3 children are currently living in a semi-detached house that they purchased 15 years ago. During that time, they had taken up a 90% mortgage loan of RM500,000 with a fixed rate of 7.5%. The housing loan was for 30 years. Next year, their twins will be going to college. They need to make sure that they have saved sufficient amount of money to ensure that their children 4 years in college is fully funded. Tuition fees for both is estimated at around RM400,000 (school fee, food and lodging). They are thinking of either refinancing or to take up a term loan. They have looked at 2 choices below: - Refinancing Term loan BLR – 1.5% (BLR = 6.3%) Up to 30 years or 65 years of age 80% margin of financing Exit fee – 5% from outstanding (before 15 years) BLR + 1.5 % Loan for RM400,000 10 years In addition to that, they also have other commitments, below are some of their monthly commitments:- Details Monthly payment (RM) Fahad extra information: Credit card visa (credit limit RM10,000- maximum usage) 1000 Credit card mastercard (credit limit RM15,000- maximum usage) 1000 Car loan (3 years remaining- balance RM32,500) 1,540 Personal loan (2 years remaining- balance RM43,000) 980 Amanda extra information: Credit card visa (credit limit RM10,000- maximum usage) 1000 Credit card Mastercard (credit limit RM10,000- maximum usage) 1000 Education loan (remaining balance RM 27,000) 450 Car loan (5 years remaining – RM 56,000) 1250 As a financial advisor, help Fahad and Amanda (both age 35) choose what is the best option for them, take up refinancing or to take up additional term loan. Market value of the house now is RM1.1Million. Provide them with both options and state which is better for them to choose. (For simplicity, amortization is using annual instalment payment).
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• Required: i. Calculate Fahad and Amanda’s current commitments and new commitments if they were to take the term loan. (7 marks) ii. Determine their new commitment if they wish to take refinancing (14 marks) iii. Between both options, formulate the best solution for them? (4 marks)
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• QUESTION 2 (50 MARKS) Marini has just inherited RM 100,000 and has decided to invest RM 70,000 in common stocks. Her objective is to build up as much capital as she can over the next 15 years, and she willing to tolerate a good deal of risk. She has no investment before this, she only has a saving in Tabung Haji. This is the first experience, so basically, Marini does not have much knowledge on investment. Marini also plan to have mutual fund investment from EPF Account 1. For now Marini has RM 185,000 accumulated in Account 1 EPF. Marini is 40 years old this year and planning to have a mutual fund investment from June 2019- June 2020.
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• As an advisor you are required to advices Marini on a few issues:
• a. Briefly explain the type of stocks Marini should invest in. Describe at least FOUR (4) types of stocks. (12 marks)
• b. Another alternative that Marini wants to consider is an investment in a mutual fund. As an advisor can you advise the difference between investment in stock and investment in a mutual fund? Explain at least FIVE (5) points for each type of investment. (10 marks)
• c. Assume there are no new contributions paid into his account during the 1-year period in Account 1 EPF Marini. Prepare table for THREE (3) times of contribution of investments. The basic savings at various ages Age (year) Basic Savings (RM) Age (year) Basic Savings (RM) 30 18,000 36 32,000 31 20,000 37 34,000 32 22,000 38 37,000 33 24,000 39 41,000 34 26,000 40 44,000 35 29,000 41 48,000 (13 marks)
• d. Calculate the return on investment for the following situations, and advise Marini on which investment can give her a good return. i. If Marini decided to invest RM70, 000 in common stock for 15 years and the expected return is 25% and invest a portion of EPF account (based on the calculation on the question (c)) in the mutual fund for 15 years that can give at least 15% return. Calculate total return. (7 marks) ii. If Marini decided to invest both amounts in the mutual fund for 15 years and 15% return. Calculate total return. (4 marks) iii. Advise which alternative is the best for Marini and explain the risk involved in that particular investment. (4 marks)

Answer rating: 100% (QA)

1 a Assuming that the monthly payment for the term loan is RM173750 the total monthly commitments will be Fahad Credit card visa credit limit RM10000 maximum usage 1000 Credit card mastercard credit l... View the full answer