Financial Mathematics – Financial Adviser

Task number: 3 Weighting: 25% Timing: Term 2, Week 8

Outcomes assessed
> models and solves problems and makes informed decisions about financial situations using
mathematical reasoning and techniques MA12-2
> applies the concepts and techniques of arithmetic and geometric sequences and series in
the solution of problems MA12-4
> chooses and uses appropriate technology effectively in a range of contexts, models and
applies critical thinking to recognise appropriate times for such use MA12-9
> constructs arguments to prove and justify results and provides reasoning to support
conclusions which are appropriate to the context MA12-10

Nature of the task

This assignment involves the use of financial mathematics to investigate real-life situations.
The task involves the preparation of a financial advice report for an imaginary client by
modelling their financial situation. There are four parts to the task. Each part is explained in
detail in the attached ‘Financial Advice – Preparing a report for a client’ sheet.

Your final submission must be in the form of a portfolio for your client. The portfolio should
include any working and justification for the advice given. Include digital files, screenshots, and
details of any spreadsheets, graphs and equations used.

The ‘Modelling Financial Situations Assessment Spreadsheet’ that accompanies this task
should also be submitted electronically. Submit this file using the naming protocol:
yourname_spreadsheet.xlsx.

Conclude your report with a paragraph of approximately 150-250 words that summarises the
financial advice that is most appropriate for your client.

Marking criteria
You will be assessed on how well you:
§ select and use appropriate mathematical processes, technologies and language to
investigate, organise and interpret calculations
§ provide reasoning and justification related to the solved problems
§ use appropriate technology to investigate, organise and communicate information
§ demonstrate understanding of financial mathematics.

Marking guidelines
§ You will receive a copy of the marking guidelines that your teacher will use to determine
your mark for the task. The marking guidelines will clarify the scope and expectations of
the task.

Feedback provided
§ The teacher will provide feedback outlining strengths and areas for improvement to
build on knowledge, understanding and skills for future learning.
Financial Advice – Preparing a report for a client
You are to provide financial advice for a client who has just completed the Year 12
Mathematics Advanced course. From the beginning January in the new year, your client will
earn an income from a part-time job while they complete at least three years of tertiary training
leading to a qualification before entering the workforce. For example, your client could
complete a 4 year apprenticeship, a 3 year traineeship or certificate, or a 3-4 year degree.

From the time they begin to earn income, your client has committed to save regularly into a
high interest savings account. They will then use these savings as a deposit for a loan. After
saving for at least five years, your client plans to make a purchase that will require them to
take out a loan. Your client will pay off the loan by making regular instalments.

There are four parts involved in preparing the Financial Advice report that your client has
requested. Each part should be written with explanations of the situation, screenshots or files
of any digital technology used, and justification of accompanying calculations

Part 1: Client Profile

§ Describe the financial situation of your client at the beginning of the January following
their completion of the HSC.
§ Decide the details of your client’s choice of employment, income, savings and
the nature of their loan.
§ State any assumptions you have made and include any research you have
undertaken to ensure your client’s situation is representative of a typical Year
12 student.
§ Include the details of the relevant employment award agreement and include a
copy or link to the award.
§ Establish a timeline for your client that clearly indicates when major changes in your
client’s financial situation will occur.
§ Explain clearly the nature of the major purchase that will take place five years after
your client begins to earn an income.
§ Include and any other details that you will need for the investment and loan
calculations.
§ Ensure that any loan conditions are currently feasible and assume the same
conditions exist over time.
§ Complete Part 1 of the ‘Modelling Financial Situations Assessment Spreadsheet’ by
adding the details required and any further assumptions that you will make.

Part 2: Investing for the Future

§ Use Part 2 of the ‘Modelling Financial Situations Assessment Spreadsheet’ to model
the investment situation for your client.
§ Include a graph of the value of the investment over time, the total of the
investment and the total interest accrued so that your client can visualise the
situation more clearly.
§ Showcase the knowledge and understanding both you and your client have of series
by including a calculation that verifies one of the calculations in your investment model.
Part 3: Achieving the Goal
§ Use Part 3 of the ‘Modelling Financial Situations Assessment Spreadsheet’ to model
the loan repayment situation for your client.
§ Include graphs of the amount owing, the total cost of the loan and the total
interest payable so that your client can visualise the situation more clearly.
§ Showcase the knowledge and understanding both you and your client have of
sequences and series by including a calculation that verifies one of the calculations in
your loan repayment model.

Part 4: Life Gets Complicated

Over time, the initial assumptions made in your financial model will become subject to change.
For example, interest rates for investments vary; interest rates for loans are typically fixed for
an initial period and then vary over time; incomes rise or fall as people change jobs or gain
expertise; the capacity to make repayments changes; or a benefit in the form of a bonus, gift
or inheritance may be received.

§ Select at least one of these scenarios and explore the effect on your financial model.

Preparing your report – Frequently Asked Questions

What is a financial model?

A financial model is a dynamic representation of a real-world financial situation that includes
tables, graphs and calculations. It works with a set of hypotheses about the present state of
the financial situation and predicts future outcomes.

How should I begin the report?

The process of financial modelling begins with setting key assumptions and gathering
information. Start the report with a description of the present financial situation of the client.
Indicate clearly the goal of the financial model.

Where can I find information?

Employment awards and income levels
http://www.abs.gov.au/ausstats/[email protected]/mf/6302.0

https://www.fairwork.gov.au/awards-and-agreements/agreements

Loan calculators
https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/personal-
loan-calculator

House prices
http://www.valuergeneral.nsw.gov.au/land_values/historical_land_values

http://www.valuergeneral.nsw.gov.au/land_values/land_value_trends

http://www.housing.nsw.gov.au/about-us/reports-plans-and-papers/rent-and-sales-
reports
Mortgage repayments
http://www.yourmortgage.com.au/compare-home-loans/fixed/

http://www.planabettermortgage.com.au/loan-calculators/p--i--interest-only.htm

What do I need to include in my report?

For this report, the key assumptions should include interest rates, income predictions, a
timeline of key events and a final statement of advice to the client. The final advice to the client
could include a number of different options the client could take to achieve a more beneficial
outcome.

How should I present the report?

There is no set format for the presentation of the report however you must include a completed
copy of the ‘Modelling Financial Situations Assessment Task Spreadsheet’ that was issued
with the assessment task.

You could choose to present the report as:

§ a slideshow
§ a digital document or portfolio
§ a handwritten document supplemented with digital files.
Marking Guidelines
Understanding, Fluency and Communication

The student: Novice Apprentice Practitioner Expert

0-2 marks per cell 3-4 marks per cell 4-5 marks per cell 6-7 marks per cell

applies the concepts Evidence of the ability to A correct strategy is chosen to Correct strategies are chosen to Correct strategies are chosen to
and techniques of solve compound interest calculate the future value of an calculate the future value of an solve unfamiliar problems
arithmetic and problems is present. annuity or to find the amount of a annuity and to find the amount of related to annuities and loan
geometric sequences For annuities and loan loan repayment. a loan repayment. repayments.
and series in the repayments, no strategy is Note: The Apprentice must There is evidence of an attempt There is evidence of analysing
solution of problems chosen, or a strategy is achieve a correct answer. to solve an unfamiliar problem complex financial situations in
MA12-4 chosen that will not lead to a related to annuities and loan mathematical terms.
solution. repayments. Note: The Expert must achieve
Note: The Practitioner must a correct answer.
achieve a correct answer.

chooses and uses A simple spreadsheet has A simple spreadsheet has been Spreadsheets have been used Well-designed spreadsheets
appropriate technology been used to model either used to model both an efficiently to model both an have been used efficiently to
effectively in a range of an investment or a loan investment and a loan repayment investment and a loan model both investment and loan
contexts, models and repayment situation. situation. repayment situation. repayment situations.
applies critical thinking No attempt to produce a A correct graph that illustrates Correct graphs that model both A variety of correct graphs that
to recognise graph is evident. either model has been included. investment and loan repayment model both investment and loan
appropriate times for situations have been included. repayment situations have been
such use MA12-9 There is some evidence of There is evidence of investigation
an attempt to investigate a and exploration of two simple There is significant evidence of included.
simple scenario. scenarios. investigation and exploration of There is extensive evidence of
a variety of different scenarios. investigation and exploration of
a variety of different scenarios.
This evidence includes an
example of a self-initiated
exploration.
Problem Solving, Reasoning and Justification

The student: Novice Apprentice Practitioner Expert

0-2 marks per cell 3-4 marks per cell 4-5 marks per cell 6-7 marks per cell

models and solves An attempt at identifying There is evidence that some There is evidence that multiple There is extensive evidence that
problems and makes assumptions is present. assumptions have been assumptions have been assumptions that make the
informed decisions There is a simplistic attempt identified and applied to the identified and applied accurately model more realistic have been
about financial to model a situation model. to the model. identified and applied accurately.
situations using involving compound There is a simplistic attempt to There is evidence of modelling Complex models of both an
mathematical interest. model a situation involving either both a situation involving an annuity and a loan repayment
reasoning and an annuity or a loan repayment. annuity and a loan repayment. are evident.
techniques MA12-2

constructs arguments Only a description of the Evidence of drawing a simple Evidence of drawing different The conclusions drawn reveal
to prove and justify model is evident. conclusion related to varying an conclusions related to varying extensive exploration of the
results and provides assumption underlying the model assumptions underlying the model in an attempt to make it
There is little or no evidence
reasoning to support
of reasoning. is present. model is present. more realistic.
conclusions which are
appropriate to the There is evidence of some Evidence of solidifying prior Evidence of analysing the
context MA12-10 relevant reasoning. knowledge and applying it to models in mathematical terms
problem-solving is present. and justifying arguments is
present.