Wealth Grounding - Foundational Part

1. Which of the following is the best way to start a successful savings programme?

Set a goal of saving 10% of your net income.

Set up an automatic monthly transfer from your net income to your savings account.

Make one large lump sum contribution.

Total savings as a variable expense.

2. A savings account pays 6% interest compounded monthly. The effective rate of interest is

6.07%

6.17%

6.27%

6.37%

3. Which of the following is generally the most expensive source of consumer credit?

Unsecured loans from banks

Credit card loans

Pawnshops

Life Insurance companies

4. A single person is looking for a new apartment. Which of the following is more likely a want rather than a need?

Modern kitchen appliance

Convenient and safe location

Energy efficient heating and cooling system

A second bathroom

5. Which of the following statements is INCORRECT concerning a $100,000, 7.5% 30-year housing loan?

You repay half the loan after 15 years.

The total interest over the life of the loan is more than the amount you initially borrowed.

Your monthly payment remains the same for the entire loan term.

All the above are incorrect.

6. Which of the following statements in incorrect?

Balance sheet alone cannot be used to identify the needs of an individual.

Cashflow statement alone cannot be used to identify the needs of an individual.

Net cashflow of an individual should always be zero.

Ratio analysis is used to analyse the “financial health” of an individual.

7. Money for small, unplanned expenses would be found in which one of the following budget categories?

Housing and maintenance

Miscellaneous expenses

Reserve funds

Savings

8. What influence does the rate-of-return assumptions have on goal planning?

I. A high rate-of return assumption may result in fewer dollars being invested to achieve a particular goal.

II. A high rate-of return assumption will allow greater flexibility in achieving a particular goal.

III. A low rate-of return assumption will create the apparent need for larger investments to be made.

IV. A low rate-of return assumption will more nearly guarantee that a particular goal will be achieved.

I and II only

I and III only

I and IV only

II and IV only

2(a)(i) Cho Yeong would like to claim deduction for all of the 3 expenses in her Income Tax return. Discuss whether she will be able to do so.

2(a)(ii) Calculate the available Life Insurance premium reliefs for Cho Yeong.

2(b) You are required to state the basis period for each of Cho Yeong’s source of income for YA 2020 and YA 2021.

2(c)(i) You are required to explain to Cho Yeong the income tax implications of each of the following activities:

1. SingTel Shares
2. Commission
3. New Property Options

2(c)(ii) Calculate Cho Yeong’s assessable income for YA 2021.

3(a) Choose the correct statements                                                              (8 marks – 1 mark each)

1. Components of the required rate of return include all the following EXCEPT
   
   The premium for expected inflation
   The premium for the market risk of the investment
   The real rate of return
   The federal funds rate
   
   
2. To implement an investment strategy, several styles might be employed. If preservation of capital is Mr Heng’s strategy, which investment style would he most likely be comfortable with?
   
   Growth investing
   Momentum investing
   Sector rotation
   Value investing
   
   
3. Important dates relative to dividends include
   
   Record date
   Payment date
   Trade date of transaction
   All of the above