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Nothing Please Ignore

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Submitted By CaseyHavenga
Words 1241
Pages 5
Investment Proposal
Casey Havenga
Introduction

A client who is 21 years old has approached me with R1 000 000 which they won in the lottery. I will split the money into three parts: R200 000, R200 000 and R600 000. One R200 000 I will invest in a Notice Deposit bank account; the other R200 000 will be invested in Unit Trust investments and the R600 000 will be invested long term in JSE’s top 40 companies. My aim as a broker is to ensure an average of 15% growth on my client’s money with minimum risk. I’ve broken up her money so that she will have a cash flow in case of emergencies and still get growth on her money.

investment 1: Notice Deposit Account

This is the most stable option for my client because there isn’t a chance that she will lose her money. With this investment my client can withdraw or deposit money after giving a 30 day notice to the bank. This way she can access these funds whenever she needs to. The interest she earns on her money is calculated with the prime rate that the bank uses. The current prime interest rate is 9%. The interest that she earns is calculated by compound interest.

Money after 5 Years: S= P(1+i) to the power of 5

S= R200 000 (1 + 0.09) to the power of 5

S= R200 000 (1.538623955)

S = R307 724.79

Total interest earned = R307 724.79 – R200 000

= R107 724.79

Tax is paid on the interest earned. According to the income tax table and he tax rebate table the amount of tax my client has to pay is:

R107 724.79 x 18% - R11 440

=R7 950.46

However after 5 years the investment is tax free

Investment 2: Unit Trust

Unit Trust is more secure than normal shares; it is shares that are bought by a group of people so the dividends are split according to the number of people that own the shares. You can withdraw and contribute at any time and it provides a

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