DB123 TMA02 Essay

971 Words Nov 26th, 2013 4 Pages
Part A (50 per cent of the marks)
Question 1
Panna wants to buy a new suite of furniture for her flat. The furniture costs £3000 from a furniture store in her local town. The saleswoman suggests that Panna takes out a loan from the store’s finance company to fund the purchase of the furniture. The repayment loan from the finance company would be at a fixed APR of 9 per cent for a repayment term of between one and four years, which Panna can select herself. The loan would take the form of a secured loan.

Panna has £3000 in a variable rate online instant access account with her building society, currently earning 3 per cent p.a. after tax. She has no other savings.

She also has the possibility of taking an unsecured loan from her
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Adan and Jane are starting to make preparations for the birth of their child. They have decided against getting married for the time being, but have nevertheless decided to manage their financial transactions through a joint account in their local bank. They first draw up a cash flow statement outlining their monthly income and expenditure. They put aside any surplus left over at the end of the month. They want to plan ahead for how their financial situation will change once their child is born.

Their income and expenditure before the birth of their child is as follows:

Income before the birth of their child:

•Adan’s net monthly salary = £2500
•Jane’s net monthly salary = £2100
Monthly expenditure before the birth of their child:

•Mortgage = £900
•Food and household items = £1000
•Entertainment (mainly eating out and cultural events) = £500
•Insurances = £200
•Direct debits (council tax, water, telephones, TV licence, electricity, gas, cable TV) = £600
•Travel to work costs = £150 (Adan £100, Jane £50)
They realise that things will change significantly after the birth happens, as follows.

Jane thinks she will be taking ten months’ maternity leave after the birth of their child. Her employer’s maternity package is full pay for the first six months, and then on the statutory maternity pay, worth about £94 net per week, for the further four months. They looked into Adan taking some paternity leave but have decided against it, and

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