2) If Greta continues making the same RESP contribution each year until Samantha starts

school and Larry and Tanya decide not to save anything for Samantha's education within
an RESP, how much will be in the RESP by the time she starts school, assuming that the
investments within the plan earn 7.5% before tax? They would like to see how it was
calculated.

  As Greta is making payment every year in RESP for Samantha, Samantha is going to
have a lump sum amount of payment by the end of 15 years when she starts school.
  The total amount of money saved up can be calculated by computing future value
based on the formula of time value of money.
  Time value of money: Time value of money is a concept that says that a sum of
money is worth more now than the same sum will be at a future date due to its earning
potential at that period of time.

 N (No. of years) 15
I/Y (Nominal Interest per year) 7.5%
PV (Present Value)0
PMT (Amount of regular payment) 2000
 FV ?

 By computing FV as per the time value of money, Samantha will have $52,236 saved up
in her RESP account by the time she starts school.

3) If Tanya wants to sell the store, she will have to discharge her mortgage early. Interest
rates on 2- year mortgages are 6.75% and the bank will impose a penalty using the interest
rate differential approach. This year, she will reduce the principal by $7,000 through her
regular mortgage payments. What penalty will Tanya have to pay to discharge the
mortgage at the end of this year?

  Yes, if Tanya wants to sell the store, she must discharge her mortgage early. Current
interest rate is 6.75% whereas the mortgage interest rate is 7.25%.
  So as per the formula of interest rate differential approach, the difference we get by
subtracting current interest rate from the mortgage interest rate is the interest rate at
which the penalty will be calculated.
  Mortgage Balance= $80,454, from which $7000 will be deducted as the principal
amount will be reduced through her regular mortgage payments, i.e., $73,454.
  Penalty= Mortgage balance to be paid x differential interest rate x no. of years for
penalty to be charged

= $ (73454 x 0.5% x 2)
 = $734.54.

  So, by the end of this year, she will have to pay a penalty of $734.54.

4) Suppose Tanya had a serious car accident, such that she suffers from amnesia and the
doctors expect that it will take her the better part of a year to recover from her physical and
mental injuries. What if Tanya became completely incapacitated today? How would it
impact the business? Where would the family get income and how much? What would you
recommend?

  Term life insurance also referred to as pure life insurance, compensates the policyholder's
beneficiaries over a predetermined period. Following the term's expiration, the policyholder has
three choices: extending the coverage for another term, switching to permanent protection, or
letting the term life insurance policy lapse.
  Disability insurance is a sort of insurance product that pays out if a policyholder becomes
disabled and is unable to work and make a living. This type of policy agrees to replace a portion
of your income if a disabling injury or illness prevents you from working in a covered
occupation.
  Financial stability for you and any family members who may rely on your capacity to earn a
living is provided by disability insurance.
  Your policy's disability insurance benefits are available for any purpose you choose, including
childcare and grocery shopping as well as out-of-pocket medical costs.

Recommendation-
So, Tanya has purchased a term insurance policy of $150,000 but she doesn’t have any disability
insurance.

Since Tanya is a sole owner and there are very high chances of the business getting shut down.
So, Tanya has some options that she can opt for-

1. Give Greta control of the business since she has assisted Tanya in the business.

2. She can opt for joint tenancy with her spouse Larry or with her mother Greta or some business
partner since it will ensure that the business doesn’t stop.

So, the family will have to rely on Larry’s income which is $62000 and $6000 rental income.
Tanya has some artwork including sculptures and paintings which has a valuation of $50,000. We
would recommend Tanya should purchase a disability benefit.

6) If Larry terminates his employment, he will lose his group health plan. What would you
recommend?

  Group benefits, are known as group health insurance, may be offered by a corporation or
organisation.
  The benefits are provided to several persons, but the business or organisation is the actual
insurance holder.
  The majority of the time, all group members are obligated to participate in the group benefits
plan.
 The following are some advantages that an employee can receive from group insurance: -

  They are relatively cheaper than individual health insurance.

  It is a general policy which covers all.
  Provision pf adding a family member in the policies are their in-group insurance
  They are generally cashless.

The disadvantage of the Group insurance area: -

  Their health-related coverage is typically limited, and their plans are highly ambiguous and
non-customized.
  Once an employee leaves the company, they are no longer eligible to receive insurance
benefits. Recommendations: -

  In general, Larry is eligible to enrol in the new group health plan.

  Larry is also eligible to enrol in the family plan with Samantha and Tanya.
  Larry Can also buy the disability insurance.