Case 1 (50 marks) Please refer the case below and answer ALL questions.

The Assessment Year would be 2021/22. Notes on computation of Salaries Tax / Personal Assessment are attached.

Jackson and Annie, both are aged 31, have been married for 4 years. Jackson is an accountant at a monthly salary of $48,000. Annie is a full-time clerk and earns $21,000 per month. Annie only makes mandatory contributions to her MPF scheme but Jackson, in addition to the mandatory contributions, he also makes voluntary contributions of $2,500 per month to the Qualifying Tax Deductible MPF schemes. They have no children.

They recently live in a self-occupied apartment valued at $5,000,000. They still have the mortgage payment amounted to $3,200,000. The current monthly mortgage payment is $19,000 paid by Jackson. The familys other monthly expenses are totaled at $21,000. Apart from the mentioned expenses, Jackson gives his parents (aged 59 and 56) $4,000 allowance monthly while Annie also supports her parents (aged 62 and 58) $4,000 living expenses monthly, both Jackson and Annies parents are not living with them.

Jackson has life insurance protection of $2,000,000 insured amount. The beneficiary of his life insurance is Annie. Jacksons employer provides group disability insurance and family medical insurance but Annies employer only provides medical insurance. Annie does not have any personal life insurance. Currently, they have no will being drafted. Jackson and Annie currently have $200,000 in their bank saving account. Jackson also has invested in some stocks which are listed on the Growth Enterprise Market (GEM) Board, the current market values of the stocks mostly are lower than the purchased prices.

Question 1 (20 marks)

(i) Jackson and Annie would like to prepare a retirement fund. Jackson plans to save $750 a month starting from today for 20 years and Annie plans to save $800 a month starting one month from today for 20 years. With the assumption of the annual interest rate is 5.5%, how much would they save in the retirement account at the end of the 20 years? (7 marks)

(ii) The Maybe Pay Life Insurance Company is trying to sell Jackson an investment policy that will pay him $35,000 per quarter forever.

(a) If the required return on this investment is 6.2%, how much will Jackson pay for the policy? (3 marks)

(b) Suppose a sales associate told Jackson the policy costs $2,000,000, what interest rate would make this be a fair deal? (2 marks)

(iii) Would you suggest Jackson and Annie to buy an investment-linked insurance policy? Explain. (8 marks)