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University of Ontario Institute of Technology
Faculty of Business & IT
Finance Area
Personal Finance: BUSI 3430-001/
***
Individual Assignment I—out of 80 points
Due date: Thursday February 11, 2021 (before 10:00 p.m.)
Administrative instructions
Please do not write your student number anywhere on the submitted assignment.
Number all pages consecutively except the title page.
Title page: The title page should contain the assignment number, full name, and your e-mail address.
All assignments must be typed. Hand written assignments will not be accepted under any circumstances.
Academic integrity must be upheld.
Text format:
o Line Spacing: Single space.
o Paper: Letter size (8.5 inch width and 11 inch height).
o Font: Times New Roman (12 pts)
o Margins: 1 inch left and right; 1-inch top and bottom.
o Page numbering: Bottom center
Assignment Submission
Late submission will not be accepted.
You are required to submit your assignment as an attached PDF file via Canvas. The name of your file,
must be in the following format: LASTNAME_FIRSTNAME_ASSIGN_1.PDF
you comply with the written instructions above, you will earn up to 2 POINTS
I. Chapter 1.
Problem 1. [4 pts].
Jack earns $4500 monthly income. His rent is $950.00 per month, his other bills are $250.00 per
month, and his car loan requires a $580 per month.
a) If Jack’s food cost $450 per week and he estimates other additional expenses to be $335 per
month, how much he will have left each month to reach his financial goals?
b) Jack is considering buying a new car instead of the old one. His new car loan will be $875 per
month, and the insurance will increase by $145.80 per month. Jack estimates that his other-related
expenses will remain the same. What is the opportunity cost if Jack purchases the new car? (Show your
calculations)
Problem 2. [4 pts].
Herman has received a gift of $4500 for his graduation, increasing his net worth by $4500. If he uses
the money to purchase a computer, how will his net worth be affected? If he invests the $4500, instead,
at 5% interest per year compounded monthly, what will it be worth in one year? How will his net worth
be affected in one year? (Show your calculations)
Problem 3. [4 pts].
Andre won a lottery and was given the following choices: He could either take $5,000 at the beginning
of each month for 25 years, or a lump sum of $1,450,000 today. Assuming weekly compounding at
approximately what interest rate (per year) would he be indifferent between the two choices? (Show
your calculations—suggestion: you can use financial calculator to solve this problem, make sure to
show your inputs).
BUSI 3430-Smimou-Winter 2021
Page 1 of 4
II. Chapter 2.
Problem 4. [5 pts]
Assume the following future values will be received at the end of each year. What is the interest rate
(per year) if the future value of these amounts at the end of year 3 is equal to $2,487.8? Yr. 1 = $500;
Yr. 2 = $850; Yr. 3 = $1,025 (Show your calculations)
Problem 5. [4 pts]
What is the future value of $25,000 received in 10 years if it is invested at 6% compounded annually
for the next six years and 7.5%, compounded semi-annually for the remaining four years? (Show your
calculations)
Problem 6. [4 pts]
How much money will Wilson have after 15 years if he invests $2,500 at the beginning of each month
and is able to earn a rate of return of 10% compounded daily on his investment? (Show your
calculations)
Problem 7. [4 pts]
Mr Slow’s goal is to pay down his student loan in 5 years. The balance today is $19,534. If he is charged
a rate of 6%, compounded monthly, what will be his monthly end-of-period payment? (Show your
calculations)
Problem 8. [4 pts]
Hassan wants to establish a savings fund from which a Light & Love Home charitable organization in
Oshawa could draw $3,500 at the beginning of each month for 30 years. If the account earns 6%
(compounded weekly), what amount does Mr Hassan have to deposit now to achieve this noble goal?
(Show your calculations)
III. Chapter 3.
Problem 9. [5 pts]
Kentaro has the following data and calculate his total assets, total liabilities and the net worth.
Stock Investments = $1800
Credit card balance = $500
Jewellery = $1000
House furniture = $800
Consumer loan balance = $600
Current value of automobile = $6000
Cash in chequing account = $1200
Balance in savings account = $3500
Other liabilities = $750
Compute his debt ratio and debt-to-asset ratio? (Show your calculations)
Problem 10. [6 pts]
Albert is 28-year-old healthcare specialist living in Pickering. He recently graduated from Ontario Tech
University and now works, as an independent professional, at S&G private health care facility. Like many
students, Albert accumulated a large student debt during his years at university and plans to pay it off within
the next five years. Perform a ratio analysis of Albert’s financial statements (debt ratio, debt-to-asset ratio,
current ratio, liquidity ratio, debt-payments ratio, saving ratio). What does your analysis reveal?
Albert’s Personal Balance Sheet
As of Today
Assets
Liquid Assets
Bank account
Personal Possessions
Investment Assets
BCE shares
Total Assets
BUSI 3430-Smimou-Winter 2021
$ 1,540
$10,280
$ 3,025
$14,845
Page 2 of 4
Liabilities
Current Liabilities
Credit card balances
Long-Term Liabilities
Student loan
Total Liabilities
Net Worth
$ 7,855
20,580
$28,435
($13,590)
Albert’s Cash Flow Statement
For the Year Just Ended
Income
Professional billings
Less: Professional expenses and taxes
Professional income net of expenses and taxes
$58,205
(23,890)
$34,315
Dividends (after taxes)
130
Total Income
Fixed Expenses
Rent
Student loan payments
Total Fixed Expenses
Variable Expenses
Utilities, personal, food, clothing and dental
Moving expenses
Credit card interest
Recreation/entertainment
Vacations
Total Variable Expenses
Total Expenses
Surplus/(Deficit)
$34,445
9,600
5,800
$15,400
$12,785
225
1,010
1,890
6,200
$22,110
$37,510
($ 3,065)
Problem 11. [4 pts]
Mr Beeya has the following assets: Car ($75,000), furniture ($66,000), stocks ($156,000), cash & checking
account ($15,000), bonds ($65,000), and saving account ($15,000), In addition, he has car loan ($25,000),
and credit card balance ($50,000). Currently, Mr Beeya does not own a house; instead, he pays the rent of
a small apartment.
What is the value of his liquid assets? What is the value of his household assets? What is the value of his
investments? Compute his current ratio. (Show your calculations)
Problem 12. [3 pts]
John Smith earns $3500 per month before taxes in his full-time job and $1200 per month before taxes in
his part-time job. About $935 per month is needed to pay taxes and other payroll deductions. What is John’s
monthly disposable income?
If John is saving $750 per month, what is his saving ratio? John has been saving for the past 8 years for a
European vacation. His vacation account currently has $12,345, and he is ready to book his trip. If he takes
the vacation, what impact will it have on his net worth? (Show your calculations)
Problem 13. [4 pts]
James incurs living expenses for $4,500 per month. He has $3,000 cash in the bank, two expensive cars
worth about $165,000, and a house worth $1 million in Ajax. However, he also carries a $15,000 credit
card liability and has a $60,000 bank loan due within six months. Compute his liquidity ratio and current
ratio. (Show your calculations)
IV. Chapter 4.
Problem 14. [4 pts]
Lee opened a tax-free savings account (self-directed TFSA account) in 2014. He contributed $4,500 to the
account in that year. In January 2016, Lee withdrew $3,500. At the end of 2016, he contributed another
BUSI 3430-Smimou-Winter 2021
Page 3 of 4
$1,500 to his TFSA. What is Lee’s unused TFSA contribution room at the beginning of 2021 (include the
year 2021 contribution)? Mr. Lee turned 18 in 2008. (Show your calculations)
Problem 15. [4 pts].
Mr Pangolin initially held 100 shares of four stocks; however, he sold all the four stocks (100 shares
of each stock) on Monday December 7, 2020. The capital gain on the sale of Teladoc Health stock
was $25,500. The capital gain on Tesla stock was $10,000, while the capital loss on GameStop stock
was $10 per share. The capital loss on the Haliburton stock was $83 per share. What is the taxable
gain or loss Mr Pangolin should record for the year? (Show your calculations)
Problem 16. [6 pts, 3 each].
A. Coco has a marginal tax rate of 26%. He realizes that he neglected to include a $5,650 tax deduction.
If he includes this $5,650 tax deduction on his tax return, how will this affect his overall tax payment?
(Show your calculations).
B. If he had forgotten a $5,650 tax credits (i.e., children’s arts amount and adoption expenses), instead of
a $5,650 tax deduction, how would his taxes be affected if he were to include these tax credits on his
tax return? (Show your calculations). [Make sure to assume the year 2017]
Problem 17. [9 pts, 3 each].
A. Jamal is a self-employed plumber. He bills his clients $60,000 a year. Total business expenses
amount to $10,000 a year. His only eligible income tax deduction is $5,000 for an RRSP
contribution. If the first $36,000 of taxable income is taxed by the Federal Government at a rate of
15% and levels up to approximately $70,000 are taxed at 22%, what is his federal tax liability before
considering tax credits? (Show your calculations).
B. George had earnings from his salary of $50,000, interest on savings of $2,000, and a contribution to a
registered retirement saving plan of $2,000. What is his net income?
C. Would you prefer a fully taxable investment account earning 8.5% or a tax-exempt investment account
earning 5.5%? Why? Assume a combined 2018 marginal tax rate of 43.41%
Make sure to use snipping tool & replicate the following table and place it at the end of your assign. copy.
Problem 1
Problem 2
Problem 3
Problem 4
Problem 5
Problem 6
Problem 7
Problem 8
Problem 9
Problem 10
Problem 11
Problem 12
Problem 13
Problem 14
Problem 15
Problem 16
Problem 17
Text Format
TOTAL
MAXIMUM TOTAL
MARKS
4
4
4
5
4
4
4
4
5
6
4
3
4
4
4
6
9
2
80
BUSI 3430-Smimou-Winter 2021
MARKS AWARDED
_______________/80 = _________%
Page 4 of 4

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Anonymous

Just what I was looking for! Super helpful.