Group Project –Case Study

The purpose of this project is to provide an experience to synthesize the personal finance concepts that
you have learned throughout the semester by applying them to a "real life" individual or family. You'll
also have an opportunity to work with fellow class members and present the results of your analysis in
15-minute class presentation.

Here's what you need to do:

1. Form a group of 7-8
2. Work for the case and providing a reasonable financial plan. Feel free to add additional assumptions to
the case as long as they are realistic for the situation and described in your report.
3. Deliver a 15-minute team group presentation about the team's recommendations.

Your financial case analysis should include the following items, as appropriate:
 An evaluation of current financial situation
 Correction of any mistake that they have about financial topics.
 Comments about the individual or family's financial situation (if any)
 Brief calculations of the savings required to reach financial goals
 3 to 5 recommended action steps to improve the individual or family's financial situation
 Recommended financial products such as bank accounts, insurance policies, and mutual funds in Hong
Kong. Information of real product is appreciated.
 Any other information that you feel is useful to the case
 References for source materials used to analyze the case (feel free to use your textbooks, class notes,
Web sites, financial publications, and other resources to assist in your analysis).

Market Information
Expected annual inflation will average 3.5% (CPI)
Prime Rate is now 5.00%
Unemployment rate is currently 3.1%

Assessment:
Evaluation of Current financial Situation (30%)
Detailed financial planning for Lam (50%)
Presentation Skills (20%)
Case: Fresh graduate from university
Larry Lam is 25 years old who is just a few years out of university. He is $48,000 in debt. Of this amount,
$40,000 is owed on student loans and $8,000 is owed on two credit cards. "I overspent for shopping,
exchange program, study tour on credit in University," Lam explains. I only repaid the minimum payment
on my credit cards. "Now I want to get this debt paid off as soon as possible so I can increase my
savings."
Lam does not want any defer payment. Therefore, Lam decided not to make any investment until he kills
his debt. He does not participate in any saving or investment plan. He saves money with his own
discipline and is currently saved $4,500, but he feels it is too slow for him.
Lam also decided that once all the debts are killed, he would like to invest in the stock market. He will put
25% of his saving in a stock index fund, 25% in aggressive growth, 25% in an actively managed growth
fund, and 25% in a money market fund. "I wasn't sure what to do," he notes, "so I made the same choices
as a co-worker."
He'd like to save more, both for retirement plan and for emergencies. "I don't have much to fall back on if
I have some other emergency," He worries. After repaying his debts and increasing his savings, Lam
wants to purchase a home in the New Territories and a new car within ten years. He is willing to assume
some investment risk to achieve a high rate of return. Lam shares an apartment with a friend and pays
$5,000 per month for rent. He earns $15,000 per month. For the MPF, Lam and his employer contribute
5% of the relevant income per month respectively.
Larry has a plan for his future life. “Nowadays, a degree honor can’t guarantee a successful career
anymore,” He believes. He realizes that postgraduate study should be a must unless he doesn’t want to be
promoted. He understands that the tuition fee is not cheap and feels that further study would cost him
about $150,000. Even though he would not take the study very soon, He believes that he will do so within
five years.
For his love, he thinks that he should get marry before 30. He thinks he should responsible for all the
spending of the wedding. For his plan, he considers that $300,000 would be appropriate. That would
include the spending on wedding party, honeymoon travel, wedding coordination, etc. He would also like
to buy a house around $5m after marriage. He is planning to split the cost with his future wife.
Like many young university graduates, Lam has now a negative net worth. In other words, at this stage of
his life, his debts ($48,000) exceed his assets ($6,000). His assets consist of $1,500 in a checking account
and $4,500 in saving account.
Lam's employer provides only medical insurance. Lam desires to retire at age 65. "I learned about the
awesome effect of compound interest," He notes. "As soon as I repay my debts, I will save more."

Lam’s Cash Outflow information per annum

Rent $60,000
Entertainment and Eating out $60,000
Transportation $10,800
Utilities $12,000
Holidays $12,000
Personal care and grooming $5,400
Clothing $6,000