FSC521: Financial Services Industry - Tax System - Impact of Natural Disasters - Changes in OCR - Financial Markets - Accounting and Finance Assignment Help

Assignment Task:

Task 1: Financial institutions and the tax system

Sanjay currently earns $95,000 per annum and his total income has exceeded $90,000 for the past two years. He has inherited $50,000 and wants to place the money on term deposit for 12 months. He’s asked you for advice on the range of financial institutions that offer this product.

(a) To illustrate the range of providers for Sanjay: 
• Select three different types of financial institution currently operating in the New Zealand financial services industry that Sanjay can place his money on term deposit with.

• For each financial institution, state their name and type of financial institution, and provide a link to the page promoting term deposits.
 
• Discuss the similarities and differences between the three financial institutions you selected in terms of: 
1. their structure 
2. how they’re regulated 
3. the services they provide. 
 
(b) You explain to Sanjay that with some providers, he has the option of placing his $50,000 on a term deposit or in a PIE Term Deposit Fund for 12 months. Both products currently offer interest at 4% per annum and there are no fees payable for either option. 

Assume Sanjay invests for the next 12 months, and that his salary remains at $95,000. Also, assume his income is derived only from his salary and this investment. Calculate his total after-tax income for each investment option and clearly highlight which option provides him with the higher after-tax income. Show all your workings.

Task 2: The impact of natural disasters and changes in the OCR

Aroha runs a small business exporting cut flowers and foliage. A year ago you helped Aroha purchase her first home using a revolving credit facility. The current balance outstanding on this facility is $451,250. She has a sum insured home insurance cover with Aotearoa Insurance. Aotearoa Insurance has a reinsurance treaty with Swiss Re.
 
Aroha has seen the following two newspaper headlines:
 
• Headline 1: ‘Inflation is rising and is expected to reach 5–6% in the next eighteen months’ 
• Headline 2: ‘Hurricane Fred in the United States and the earthquake in Japan set to impact homeowners’.

She seeks advice from you on how these factors will affect both her business and her personal financial situation.
 
(a) Headline 1:
Analyse the impact of rising inflation on Aroha.

You are required to: 
• Predict the action the Reserve Bank of New Zealand will take in response to rising inflation. 
• Analyse how and why rising inflation will impact Aroha’s personal financial situation in terms of her home loan. 
• Analyse how and why rising inflation will impact Aroha’s business in terms of its export earnings. 
 
b) Headline 2: Analyse how and why these overseas disasters will impact Swiss Re, Aotearoa Insurance and Aroha, as the insured under a home insurance policy. 

Task 3: Financial markets and the impact of the business cycle

Last year you helped Eliana choose the right KiwiSaver fund. She knew little about financial markets and you provided her with some background information on managed funds to help her make a decision about which fund to select. She chose the Aotearoa Investments Balanced KiwiSaver Scheme.

Last week she received the latest Aotearoa Investments Balanced KiwiSaver Scheme fund update. This has prompted her to ask you to help deepen her understanding of where her KiwiSaver funds are invested. You decide to use Aotearoa Investments’ top 10 investments to illustrate the main markets her funds are invested in.

(a) For each of the four investments, identify the market in which it can be traded. 

(b) Compare and contrast the four markets you identified in (a) in terms of their: 
• market type 
• operation 
• timeframe 
• access. 

(c) Explain the role of the following organisations in the issuing or settling of the three securities (investments 1–3) in Aotearoa Investments’ Top 10 investments. 
• New Zealand government/Spark New Zealand Ltd/Rabobank 
• NZX 
• New Zealand Debt Management 
• The Reserve Bank of New Zealand.

(d) Using the investment clock concept, discuss how changes in the business cycle impact the four financial markets you identified in (a).

For each phase in the business cycle you must: 
• identify the most attractive market during that phase 
• give two reasons why that market is the most attractive during that phase.

Task 4: Regulators

You’ve been asked to write an article for an online magazine that focuses on the financial services industry. The article is called:

‘The Reserve Bank and the FMA – who regulates what in the financial services industry?’

Write the article, describing the four roles of the Reserve Bank of New Zealand and the four roles of the Financial Markets Authority in regulating the financial services industry. 

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