FINA 200 - Personal Finance ©

SAMPLE Case – not graded

Covering Chapters 1 – 7

Student Name: Student ID:

PLEASE NOTE INSTRUCTIONS BELOW

 Write your name and student ID above.

 This is an individual assignment, to be completed by you alone.
 There are 12 pages to this Case Solution including the cover page – please ensure that
you have all 12 pages.
 The case consists of two sections. Answer:
 Section I: respond directly on the Case. You MUST highlight AND underline your
response to the multiple-choice questions.
 Section II: respond directly on the Case in the space provided for each Mini-Case
question. You MUST highlight AND underline where requested.
 You may submit your solution in English or French; acceptable submission formats
include Word (.docx or.doc) or PDF. EXCEL is NOT accepted.
 Ensure that all responses with calculations are to two decimal places.
 Tables can be found at the end of the Case to help respond to some of the questions.
 Outside research will be required (research does not require citations).

This is a SAMPLE Case only and is not graded.

For marking purposes only:

Multiple Mini-Case A Mini-Case B Mini-Case C Mini-Case D Mini-Case E Total

Choice
/5 /5 /5.5 /3 /1 /5.5 /25

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Section I: Five (5) Multiple-Choice Questions (5 marks - 1 mark each)
Highlight AND underline your response.
1) Léa’s current gross annual salary is $115,000. Her employer withholds monthly
income taxes and other payroll deductions of $3,550. She is, however, interviewing for
another job. The potential new employer is offering a salary of $125,000 with monthly
withholdings and other payroll deductions of $4,100. Léa’s monthly fixed expenses are
$3,425, while her variable expenses are $2,155. The remainder of her pay goes to her
monthly savings account. What would be the difference in her monthly disposable
income if she changed jobs?
a) $1,860
b) $283
c) $360
d) $2,800
e) $465

2) Catherine lives in Montreal and just graduated in December 2022 from Concordia’s
Gina Cody School of Engineering. To save money for a house in two (2) years, she
decided to take a great job opportunity on January 1, 2023, by working in a remote
area in northern Quebec in engineering. Many of her expenses such as food and
lodging are covered by her employer. She is making great money and earning a gross
salary of $120,000. At the start of 2023, she put $6,500 in her Tax-Free Savings
Account (TFSA) and is making regular Registered Retirement Savings Plan (RRSP)
contributions of $1,000 per month (as she has previous years RRSP contribution room
of $12,000). She paid her Quebec Engineering professional annual dues of $600 and
is also paying her annual union dues of $450 as she is part of a labour union. The
remainder of her pay is going to her chequing account, which she will eventually
transfer into a savings account. What is Catherine’s marginal tax rate in 2023?
a) 36.12%
b) 41.12%
c) 45.71%
d) 47.46%
e) 50.23%

3) Little Calvin is five years old. His grandfather just gave him a big bucket full of coins
that his grandfather had saved his entire life. Calvin rolled them up and had his mother
deposit them for a total of $3,650 to his newly opened bank account. If Calvin keeps
this in his savings until he turns 60 and saves at a rate of 4.05% compounded per
week, how much will Calvin have in his savings at his retirement?
a) $45,324
b) $33,830
c) $29,473
d) $41,995
e) $35,563

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4) Parvati is 21 years old and a full-time student at Concordia. She has never filed a
personal income tax return but was thinking of doing so for her 2022 income tax
returns. She has always lived in Quebec and held summer internships and part-time
jobs throughout her studies since she was 18 years old. Her employers have always
withheld Federal and Provincial taxes and she has consistently earned $13,000 a year.
Which statement reflects the best advice to Parvati regarding her 2022 personal
income tax returns?
a) Parvati should file her tax returns as she may owe taxes; she may also be entitled
to claim certain benefits and credits that may be due to her.
b) Parvati should file her tax returns as she may be entitled to refunds; she may also
be entitled to claim certain benefits and credits that may be due to her.
c) Parvati should file her tax returns as she owes taxes and will have penalties and
interest owing as it is past the April 30, 2023, filing deadline.
d) Parvati is entitled to refunds. By filing her tax returns, it will allow her to carry
forward her tuition non-refundable tax credit to use in future years and to
accumulate Registered Retirement Savings Plan (RRSP) contribution room as well
as claim certain benefits due to her.
e) Parvati can wait until Canada Revenue Agency (CRA) sends her a formal request
to file her tax returns.

5) Jun’s first term at Concordia was in the Winter 2023. After having taken a Personal
Finance course, he knew that he would be the target of credit card companies
approaching him for his business. As he also had a bank account with RBC, he
thought it best to build credit history with them and accepted RBC’s student credit card
offer for his first credit card https://www.rbcroyalbank.com/credit-cards/rewards/rbc-ion-
visa.html
Jun knew from the course that it was not wise to use his credit card for cash advances,
however he found himself with some cashflow issues and felt that he had no choice.
What would be Jun’s effective interest rate on his credit card for having taken a cash
advance? Hint: use the credit card details below as well as 365 days for compounding.

a) 22.59%
b) 23.35%
c) 24.47%
d) 25.84%

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 e) 26.32%
Section I completed, continue to Section II.

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Section II: Five (5) Mini-Cases (20 marks)
Write your response in the template or space provided.

Mini-Case A: (5 marks)
Rachel and Max moved in together in January 2023. Rachel is your best friend, and you are very
concerned as her boyfriend is a real spender and taking advantage of Rachel’s generous nature.
As both you and Rachel are taking FINA 200, you decided to have a talk with her as she is
ignoring some red flags. Use the information from the case for your responses.

Rachel:
 Is enrolled in Concordia University’s JMSB program
 works part-time at the Bank of Montreal (14 hours/week at $21/hour, earning $13,000/year
 living pay cheque to pay cheque
 paying for her tuition from her Registered Education Savings Account (RESP)
 has $1,000 in savings for emergencies

Max:
 is doing his undergraduate degree at McGill in the Faculty of Medicine
 his parents are paying for his schooling as it is their wish for him to be a doctor (they have
pressed Max to prepare a budget, but Max insists it is pointless as it varies month to
month)
 studies little as his gaming is taking up a lot of his time for which he believes he can make
money
 does not like to cook, relies on Uber Eats
 just applied for his third credit card as the other two were at their maximum limit

Rachel and Max:

 the utility bills and the lease agreement are in both their names

a) Max “forgot” again to pay his portion of the July 1 st rent. Rachel only found out when an
angry landlord showed up at their door demanding an immediate e-transfer. As Max did
not have any money, Rachel paid from her savings. This seems to be a pattern, as Max
has not paid the utility bills either, with Rachel having to come to the rescue on a regular
basis. Max thinks Rachel worries too much about finances. Max is confident that nothing
will impact his credit and that the banks will love him once he graduates from either
medical school or makes it big as a gamer. Based on the information provided, is Max
correct about his credit? Give the reason to support your response. (1 mark-.5 marks
each)

1) Yes or No (highlight and underline your response)

2) Reason:______________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

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b) Through your own personal financial planning studies, and as Rachel’s best friend, you
want to discuss the impact on her finances due to Max’s approach with his finances. Give
two potential impacts on Rachel. (1 mark-.5 marks each)

1) Impact:______________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

2) Impact:______________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

c) Rachel argued with Max to order his credit report from either of the two Credit Bureaus
which are ________________and________________. (.25 marks)

d) Explain to Max what a Credit Bureau is. (.25 marks)

Response:______________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

e) Max is not interested in getting his credit report as he knows that this will harm his credit
score. Is Max’s statement true or false? Explain what “soft hits” versus “hard hits” are to
credit check queries. (.5 marks-.25 marks each)

1) True or False (underline and highlight your response)

2) Response:___________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

f) What are two (2) examples of “hard hits” to credit checks? (.5 marks-.25 marks each)

1) Example:_____________________________________________________________
_____________________________________________________________________

2) Example:_____________________________________________________________
_____________________________________________________________________

g) Max was tired of hearing Rachel ask him to apply for his credit report and made the
request. Max knew that he would get a great rating and was pleased when the report
finally came in with a Beacon Score of 350. What does this score represent? (.25 marks)

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 Response:______________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
h) Max no longer wanted to deal with his parents’ questions about budgeting. To have extra
money, he decided to go to the bank to request a line of credit. The bank required
someone to co-sign the loan. He asked Rachel to do so. What do you recommend to
Rachel? Explain your response. (.5 mark -.25 marks each)

1) Yes, recommend or No, do not recommend (underline and highlight your response)
2) Response:___________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

i) Max can easily improve his credit score. Provide him with three (3) ways that he can do
so. (.75 marks -.25 marks each)

1) _____________________________________________________________________
_____________________________________________________________________
2) _____________________________________________________________________
_____________________________________________________________________
3) _____________________________________________________________________
_____________________________________________________________________

Mini-Case B: (5.5 marks)

François’ father, Michel, is a single dad and is working hard to pay for his son’s university tuition.
To help, François works part-time and has earned a gross salary of $14,000 over the last couple
of years, including 2022. Michel has not yet filed his 2022 personal income tax return and is

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waiting for François to provide him with his T2202 tuition tax form from Concordia.

a) Based on François’ tuition tax slip, how much of his tuition can he transfer to his father for
Michel to use on his Federal tax return? (.5 marks)
$____________________________
b) Without François’ T2202, Michel believes that he owes taxes of $8,000 to the Canada
Revenue Agency (“CRA” – Federal tax authorities). Michel is looking to file his 2022
personal tax return on July 31, 2023. Calculate Michel’s Federal penalty for filing late
(ignore the interest amount owing). (1 mark)

Calculation: (1 mark)

c) If Michel receives François’ T2022, by how much would the current $8,000 in taxes owing
be reduced? (1 mark)
Calculation: (1 mark)

d) Complete the sentences regarding Federal tuition: (.5 marks)

In general, a student may transfer a maximum amount of the current year’s federal tuition
to ___________, or ___________, or ___________, or ___________ or ____________.

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 e) François (age 22) has never made a Tax-Free Savings Account (TFSA) contribution.
Michel’s father made the maximum TFSA contribution in the first year only when the
program started in 2009 but withdrew the amount 10 years later when the market value
was $75,290! He has not made any contributions since, except for this year’s contribution
for $6,500 in January 2023. What is the maximum amount that he can contribute to his
TFSA as of July 2023? Do not forget to consider contribution room from previous years. (2
marks)

TFSA Contribution room for François: (1 mark)

TFSA Contribution room for Michel: (1 mark)

f) Michel has heard of some Canadians that are millionaires with their TFSA’s. If that were
the case and they withdrew $1 million dollars from their TFSA account in 2023, how much
tax would they pay on the withdrawn funds if they were in a 53.31% marginal tax bracket?
(.5 marks)

Tax calculation on $1 million TFSA withdrawal: (.5 marks)

Mini-Case C: (3 marks)
Barb has always lived in Quebec and just graduated from Concordia in December 2022 and
started her full-time employment as of January 1, 2023. Prior to this, she only held part-time jobs
as an intern.
Facts for 2023 for Barb:
 Gross annual salary of $71,000
 Interest income of $500
 Unused tuition carry over from 2022: $7,000
 Made Registered Retirement Savings Plan (RRSP) contribution of $3,000
 Registered Retirement Savings Plan (RRSP) contribution room of $10,000
 Made Tax-Free Savings Account (TFSA) contribution of $2,000
 Tax-Free Savings Account (TFSA) contribution room of $18,500
 Sold 50 shares in Intact Financial at $193 per share on July 10, 2023 (paid a total of
$7,700 for 70 shares when she purchased them in 2020)
 Net capital loss from previous years of $400

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 a) Using Table A, calculate Barb’s taxes payable (ignore non-refundable tax credits for this
problem). (2 marks)
Barb’s Taxes Payable for 2023 (2 marks)

b) Calculate Barb’s average tax rate and marginal tax rate for 2023. (1 mark):
Tax calculation
Average tax rate (.5 marks)
Marginal tax rate (.5 marks)

Mini-Case D: (1 mark)
Meghan is 20 years old and has decided that on January 1 st she will contribute $6,500 each year
to her Tax-Free Savings Account (TFSA) until she turns age 60. Assume it is January 1, 2023,
and that Meghan has just made her first TFSA contribution. How much will she have in 40 years
in her TFSA if she expects to earn 7% compounded monthly? Assume that TFSA contribution
limits remain at the $6,500 limit until Meghan’s retirement.

Calculate Meghan’s TFSA at retirement: (1 mark)

Mini-Case E: (5.5 marks)

Mallory is very excited as she has just found the perfect condo! She feels confident that the bank
will provide her with a mortgage as she received a pre-approval certificate. Mallory has worked
hard to get her credit score up (currently at 720). Mallory is ready to make an offer on the condo
which is listed at $435,000. She has savings for a 10% down payment which she knows would
require mortgage loan insurance. Mallory believes that she meets Canada Mortgage and
Housing Corporation (CMHC) requirements to qualify for mortgage loan insurance:

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Default Mortgage Insurance rates:

a) Mallory has been having a rough time with the bank and is no longer sure as to what a
pre- approval certificate means as they now need more information on her finances to run
through some ratios. Explain to Mallory what a pre-approval certificate is. (.5 marks)
_______________________________________________________________________
_______________________________________________________________________
b) Mallory is meeting with CIBC to discuss her potential mortgage with them and the ratios
that they require. Mallory’s gross annual income is $118,000. The condo would result in
monthly heating costs of $575, condo fees of $1,800 per year, while her annual municipal
property and school taxes would be $4,730. Her only debt is a car loan of $865 per month.
Calculate her Total Debt Service (TDS) ratio using a monthly mortgage payment of
$2,600. (1 mark)

Calculation TDS:

c) Does Mallory meet the TDS ratio requirement for CMHC default insurance based on their
new underwriting guidelines from July 1, 2021? (Underline and highlight your response).
(.5 mark)
Yes or No
d) Calculate her Gross Debt Service (GDS) ratio. (1 mark)

Calculation GDS:

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e) Does Mallory meet the GDS ratio requirement for CMHC default insurance based on their
new underwriting guidelines from July 1, 2021? (Underline and highlight your response).
(.5 marks)
Yes or No
f) Calculate Mallory’s mortgage default insurance using the above table Default Mortgage
Insurance rates. (2 marks)

Calculation:

The End
Good luck!

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 TABLE A

TABLE B

TABLE C
Tax-Free Savings Account (TFSA): Annual Limits
Years Annual Limit Years Annual Limit
Year started 2009 - 2012 $5,000/year 2016 - 2018 $5,500/year
2013 - 2014 $5,500/year 2019 - 2022 $6,000/year
2015 $10,000/year 2023 $6,500/year
TABLE D
Home Buyer’s Plan (HBP)

 Withdraw up to $35,000 per borrower and up to $70,000 per couple.

 15 years to pay back the amount withdrawn

TABLE E

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 Registered Retirement Savings Plan (RRSP): Annual Limits
Formula for RRSP contribution limit: 18% of your previous year's earned income less your previous year's pension
adjustment to an annual maximum.

Year Annual maximum contribution limit

2021 $27,830

2022 $29,210

2023 $30,780

TABLE F - Time Value of Money Formulas

Future (FV) of a single dollar amount

Present Value of a single dollar amount

Future Value of an annuity

Present Value of an annuity

Interest Rate Conversion

Time Value: Simple interest:

FV = Maturity value or Future value
PV = Principal or Present value
PMT = Periodic annuity payments I = Interest earned
n = Number of compounding periods per year P = Principal or Present Value
i = Annual interest rate r = annual interest rate
t = Time (in years) t = time (in years)
EY = Effective yield

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