Fobe302

Topics: Loan, Credit, Investment Pages: 3 (629 words) Published: July 10, 2013
FOBE302 Winter 2013

Case Study

We have a couple in their mid forties. Christopher works in the media and earns $135,000 p.a. before SGC and salary sacrifices an extra $10,000 p.a. His wife Anne works in IT and earns $145,000 p.a. before SGC and also salary sacrifices an extra $10,000 p.a. Next month Anne is to receive a bonus of $15,000 which she is planning to contribute to super as a concessional contribution.

They bought their home 2 years ago with a mortgage of $1,250,000. The home is now worth $1,450,000. The mortgage is a standard principle and interest loan over 25 years and costs them $7,491 per month.

They have four children: a 19 year old, a 16 year old, a 14 year old and a 10 year old. The three youngest go to a private school costing $60,000 p.a. There are 4 terms in the year and the fees are due at the beginning of each term. A new term commences next month.

The 19 year old is apprenticed to a local restaurant and is training as a chef. He earns $16,500 p.a. before SGC and works an average of 120 hours per month and goes to college.

Christopher and Anne have their own Self Managed Superfund. Christopher has $175,000 in the fund and it is invested in cash. Anne has $180,000 in the fund and it is invested in a listed debenture issued by XYZ Ltd, a large property development company.

Over the years Christopher and Anne have tried to diversify and have the following investments:

3 years ago they used a margin loan of $135,000 to purchase 90,000 $2 shares in a newly listed mining company. Unfortunately in the last day or so the shares have fallen in value and are now only worth $1.40 each. The mining company does not pay a dividend.

4 years ago they purchased, as joint tenants, an apartment/unit for $450,000 by way of a Line of Credit for $450,000 at 5.45% p.a. The unit is managed by an agent and they receive $500 per week as rent. The agent has told them it is now worth $585,000.

When Christopher’s father died 4 years ago...
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