FINA 200 - Personal Finance
Case 1 Solution
Winter 2023, Section EC
Case 1 (due March 17, 2023, before 11:59 p.m. ET)
Covering Chapters 1 – 7
Student Name:
Student ID:
PLEASE NOTE INSTRUCTIONS BELOW
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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.
Case 1 consists of two sections. Answer:
 Section I: respond directly on the Case and highlight as well as 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 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 Case is 20% of your grade.
For marking purposes only:
Multiple
Choice
/5
Mini-Case A
Mini-Case B
Mini-Case C
Mini-Case D
Mini-Case E Total
/2
/1.5
/6
/1.5
/4
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Section I: Five (5) Multiple-Choice Questions (5 marks - 1 mark each)
Highlight AND underline your response.
1)
a)
b)
c)
d)
e)
Samantha and Samuel both have student credit cards issued by VISA. Their credit card
statements show they are at their credit card limit of $500 this month. Samantha
manages her credit well and ensures that her credit card balance is paid off in full each
month before the payment deadline while Samuel cannot manage to pay off the
minimum amount required each month. Complete the sentence: For Financial Statement
reporting purposes, __________________________________________.
It does not matter where Samantha or Samuel report the $500 as long as it is shown on
one of their Financial Statements.
Both Samantha and Samuel would report their $500 on their Balance Sheet as a current
liability.
Both Samantha and Samuel would report their $500 on their Cash Flow statement as
an expense.
Samantha would report her $500 on her Cash Flow statement as an expense while
Samuel would report his credit card debt of $500 on his Balance Sheet as a current
liability.
Samantha would report her $500 on her Balance Sheet as a current liability while
Samuel would report his credit card debt of $500 on his Cash Flow statement as an
expense.
Geneviève is in her first year at Concordia. She is originally from Quebec City but lives
near the university in downtown Montreal during the school year. She has been
approached by the Bank of Montreal for a BMO Cashback Mastercard for students
for her first credit card. What would be Geneviève’s effective interest rate on her credit
card if she took a cash advance? Hint: use the credit card details below as well as 365
days for compounding.
2)
a)
b)
c)
d)
e)
25.85%
24.59%
23.67%
24.47%
26.32%
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3)
a)
b)
c)
d)
e)
Shelly just graduated from Concordia in December 2022 and started her full-time
employment as of January 2023. She has asked you to help her calculate her taxable
income for 2023 based on the following:
 Employment income (gross): $72,000
 Interest income: $500
 Unused tuition carry over from 2022: $6,000
 Engineering professional dues: $1,200
 Annual union dues: $550
 RRSP contribution: $3,000
 TFSA contribution: $2,000
 Sold 300 shares in XYZ company at $32 per share on January 10, 2023 (paid a
total of $8,700 for 600 shares when she purchased them in 2022)
 Net capital loss from other years of $1,400
$66,525
$61,525
$68,975
$68,700
$66,975
Taxable income=72,000+500-1200-550-3000+0.5*(9600-4350)-1400=$68,975
a)
b)
c)
d)
e)
Maryse contributes $1,000 of her pre-tax income to her employer’s Group Registered
Retirement Savings Plan (RRSP). Her employer will match her contribution to her Group
RRSP. Ignore income taxes. Her disposable income will then:
Decline by $1,000
Increase by $1,000
Decline by $2,000
Increase by $2,000
Remain the same
a)
b)
c)
d)
e)
Jax and Jackie are signing their mortgage today with regards to the purchase of their
first condo. As they have no other savings other than their Registered Retirement
Savings Plan (RRSP), they are required to participate in the Home Buyers Plan (HBP)
for the entire down payment. To date, Jax has contributed $25,700 while Jackie has
contributed $41,200. At the beginning of the year on January 1, 2023, the market value
of their RRSP’s was $43,890 for Jax and $52,310 for Jackie. With the recent downturn
in the markets, as of today, the market value of Jax’s RRSP is $34,150 and Jackie’s is
$35,350. They need to let the bank know today how much they have for a down
payment. What is the maximum amount they can withdraw from their respective RRSP’s
to put towards their down payment on a home under the HBP?
$70,000
$69,500
$66,900
$96,200
$69,150
4)
5)
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: (2 marks)
Cindy graduated from Concordia in December 2021 and started her full-time job in January 2022
with a salary of $80,000. She never worked until her first job in 2022 but knew from her FINA 200
course to file a tax return throughout her university years to record her tuition so as to carry the
tuition amounts forward to claim in future years when she would have income. The year 2022 will
be the first year that Cindy claims the tuition non-refundable tax credit due to her employment
income. Cindy’s Federal tuition tax credit in 2021 was $4,200, (same for 2020 and 2019 for total
tuition carryforward of $12,600). See Cindy’s Concordia 2021 tuition tax slip T2202 below which
she filed in her 2021 tax return (and was the only line item in her personal tax return as she had
no income; the same zero tax filing was done in 2019 and 2020, to record the tuition amounts
only).
a) In 2022, Cindy’s employer did not withhold sufficient income taxes and Cindy owes $2,000
to Canada Revenue Agency (CRA) on her 2022 Federal personal tax return. How much
tuition can Cindy claim on her 2022 Federal personal tax return? (.25 marks)
$12,600 or $1,890 ($12,600 x 15%) $________________
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b) In 2022, Cindy’s father owed $5,000 to Canada Revenue Agency (CRA) on his 2022
Federal personal income tax return so he asked Cindy to transfer her tuition tax credit and
to provide him with her T2202 tax slip from Concordia. How much tuition can Cindy transfer
to her father for him to use on his 2022 Federal personal income tax return? (.25 marks)
$0 as Cindy has claimed her tuition
or
$4,200 if Cindy does not claim her tuition (also accepted)
c) Complete the sentences regarding Federal tuition: (1.5 marks - .25 marks each)
In general, a student may transfer a maximum of $_________ $5,000 of the current year’s
federal tuition amount.
Who can claim unused tuition credits (either all or some of the remainder not claimed)?
___________, or ___________, or ___________, or ___________ or ____________.
Student’s spouse or common-law partner, parent, grandparent, spouse's or common-law
partner's parent or grandparent
Mini-Case B: (1.5 marks)
Lori is 45 years old and has always contributed the maximum to her Tax-Free Savings
Account (TFSA) on each January 1st since the program started in 2009. As of January 1,
2023, she has contributed a total of $88,000 which includes the latest contribution of $6,500,
for a total market value of $234,590! If Lori continues to contribute $6,500 each January 1st
until her retirement in 20 years, how much will she have in her TFSA where she expects to
earn 6% compounded weekly? Assume that we are January 1, 2023, and that TFSA
contributions continue on each January 1st at $6,500 until Lori’s retirement.
Calculate Lori’s TFSA at retirement: (1.5 mark)
Step 1:
Set to BEGINNING
P/Y=1; C/Y=52
n = 20; i = 6; PMT = $6,500; PV=0
FV = $258,850.30 (.5 marks)
Step 2:
Set to BEGINNING
P/Y=1; C/Y=52
n = 20; i = 6; PV = $234,590 - $6,500 = $228,090; PMT=0
FV = $756,761.78 (.5 marks)
Step 1 + Step 2:
$258.850.30 + $756,761.78 = $1,015,612.08
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Lori will have savings of $1,015,612 at age 65 (.5 marks)
Or also accept $1,022,112 ( P/Y = 1; C/Y = 52; N = 20 years; I/Y = 6%; PV = -$234,590
PMT = -$6,500)
Mini-Case C: (6 marks - .5 marks each)
Michael turned 25 years old on March 1, 2023, and just opened a Tax-Free Savings Account
(TFSA) where he deposited $6,500. Help Michael with the scenarios below. Michael is aware of
the following basics regarding TFSA’s:
 you can withdraw any amount from your TFSA whenever you want;
 all withdrawals are tax-free;
 withdrawing from your TFSA doesn’t result in lost TFSA contribution room;
 withdrawals you make this year will be added to your unused contribution room
the following year (i.e. withdrawing from your TFSA has no effect on your
contribution room in the year that you make the withdrawal, it only affects your
contribution room for the following year);
 you can re-contribute any funds that you have withdrawn from your TFSA back
into your account starting the year after the year in which you make the withdrawal
(i.e. January 1st of the following year); and
 you can carry forward any uncontributed amounts into future years indefinitely.
a) If Michael’s $6,500 TFSA investment decreases due to a downturn in the market to $4,000
which he then withdraws, how much can Michael recontribute? (ignore carry forward
contribution room) (.5 marks) $__________ $4,000
(also accept $0 if we do not consider carry forward contribution room)
Note: if you are planning to withdraw from your TFSA in the short term, consider the effect
market fluctuations can have on your future contribution limit.
b) If Michael’s $6,500 TFSA investment increases to $8,000 which he then withdraws, how
much can Michael recontribute? (ignore carry forward contribution room)? (.5 marks)
$____________ $8,000
(also accept $0 if we do not consider carry forward contribution room).
c) Michael’s friend, John just turned 23 on February 28, 2023. He recently opened a TFSA
account but has yet to make a TFSA contribution. How much can John contribute to his
TFSA (consider carry forward contributions). $___________ (.5 marks)
$36,000 ($6,500 in 2023, $6,000 from 2022 to 2019, $5,500 in 2018)
d) Michael’s younger brother, Sam is trying to understand his TFSA available contribution
room to ensure that he does not go over the limits. Complete the TFSA Available
Contribution Room Table below. (2.5 marks - .5 marks each)
TFSA Available Contribution Room Table
Date
February 28, 2021 Sam turned 18 and opened a TFSA
January 1, 2022
New contribution room available
May 23, 2022
Contributes $12,000
September 1, 2022 Withdraws $1,000
TFSA Available Contribution Room
$6,000 contribution room in 2021
$12,000 contribution room in 2022
$0 contribution room in 2022
$0 contribution room in 2022
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Date
Jan. 1, 2023
New contribution room available
TFSA Available Contribution Room
$7,500 contribution room in 2023
Sam has $6,000 in contribution room when he turns 18 in February 2021 as that is the TFSA
contribution limit for 2021. His available contribution room decreases when contributions are made
to his TFSA throughout the year, however, withdrawals keep his TFSA contribution room the same.
In 2023, Sam’s contribution room consists of three things: 1) 2023 TFSA contribution limit of
$6,500, 2) unused contribution room from the previous year (2022) which is nil, and 3) the
withdrawals he made in the prior year. $6,500 + $0 + $1,000 = $7,500.
e) Sam wants to know what would happen if he over contributed to his TFSA? (.5 marks)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
At any time in the year, if Sam contributes more than his available TFSA contribution room, he will
have to pay a tax equal to 1% of the highest excess TFSA amount in the month, for each month
that the excess amount stays in his account.
f) Michael’s father has never made any TFSA contributions since the program started in 2009
except for this year’s contribution of $6,500. What is the maximum amount that he can
contribute to his TFSA as of March 2023? Do not forget to consider contribution room from
previous years. (.5 marks)
Contribution room amount for Michael’s father: (.5 marks)
2023
$6,500
2019-2022 ($6,000 x 4 years)
$24,000
2016-2018 ($5,500 x 3 years)
$16,500
2015
$10,000
2013-2014 ($5,500 x 2 years)
$11,000
2009-2012 ($5,000 x 4 years)
$20,000
Total
$88,000 - $6,500 = $81,500 (.5 marks)
g) Michael 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, 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 mark)
2023 $0 (.5 marks)
Growth on your investments inside a TFSA does not affect your contribution room, and you can
take money out when you want, for any reason, without paying any tax. If you take money out, you
can re-contribute it the following year, in addition to the annual maximum.
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h) Michael wants to know in point g), if the taxpayer withdrew $1 million dollars from their TFSA
account, how much could they re-contribute to their TFSA the following year? Ignore
previous year’s and 2024 contribution room. (.5 marks)
$____________ $1 million
Mini-Case D: (1.5 marks)
Gerry is a resident of Quebec and has been with the same employer, XYZ company for the last 3
years.
Facts:
Gerry’s gross salary in 2022:
$96,000 (ignore non-refundable tax credits for this problem)
a) Using Table A, calculate Gerry’s taxes payable (1 mark)
Gerry’s Taxes Payable (1 mark)
Tax bracket
Income
$46,295 & under
$46,295
$46,596-$50,197
$3,902
$50,198-$92,580
$42,383
$92,581-$96,000
$3,420
Total taxes payable for 2022:
Tax rate
27.53%
32.53%
37.12%
41.12%
Taxes payable
$12,745.01
$1,269.32
$15,732.57
$1,406.30
$31,153.20
b) Calculate Gerry’s average tax rate and marginal tax rate. (.5 marks):
Tax calculation
Average tax rate
$31,152.20/$96,000= 32.45%
(.25 marks)
Marginal tax rate
41.12%
(.25 marks)
Mini-Case E: (4 marks)
Eva and Jorge just received the call from their real estate agent that their offer of $350,000 was
accepted on a Montreal condo! Money will be tight since it took all their savings for a 10% down
payment. They are trying to monitor their costs to avoid any surprises. The Canada Mortgage
Housing Corporation (CMHC) mortgage loan insurance premium is 3.10% of the mortgage amount
which they have decided to pay at the time of closing instead of adding it to their monthly mortgage.
Other fees include a $650 bank appraisal fee, a $800 home inspection fee, $1,800 notary fees,
land transfer tax (also known as the “Welcome tax” or “Transfer duties” – see table below) and
$850 for title insurance and homeowner’s insurance of $1,000.
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https://montreal.ca/en/articles/how-property-transfer-duties-are-calculated-9279
a) How much will Eva and Jorge need to cover at closing including the down-payment?
(2 marks)
Calculation: (2 marks)
Down payment ($350,000 x 10%) (.5 marks)
CMHC mortgage loan insurance:
($350,000 - $35,000) x 3.10% ) (.5 marks)
Appraisal fee
Home inspection
Notary fee
Land transfer tax*(.5 marks)
Title insurance
Homeowner’s insurance
Total closing costs (.5 marks)
$35,000.00
$ 9,765.00
$ 650.00
$ 800.00
$ 1,800.00
$ 3,593.00
$ 850.00
$ 1,000.00
$53,458.00
Land transfer tax*
Multiply $55,200 by 0.5 % = $276.00
Multiply $276,200 – $55,200 by 1.0 % = $2,210.00
Multiply $350.000 - $276,200 by 1.5 % = $1,107.00
For a basis of imposition of $350,000, for 2023, total fees will be $3,593.00
b) Eva and Jorge do not have a _conventional___ mortgage as they do not have the 20%
down payment. (.25 marks)
c) Eva and Jorge’s bank just called as they calculated their Gross Debt Service (GDS) ratio
as 32%, how much will the monthly mortgage payment be based on this ratio? Eva’s gross
annual income is $120,000 while Jorge’s is $115,200. The monthly heating would be $475,
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condo fees of $800 per month, and annual property taxes would be $3,600 along with
monthly debt payments of $1,755. (1 mark)
Calculation: (1 mark)
Page 197
.32 = X + $475 + $3,600/12 + $800/2
($120,000 + $115,200)/12
.32 = X + $475 + $300 + $400
$19,600
$6,272 = X + $475 + $300 + $400
X = $6,272 - $475 - $300 - $400
X = $5,097 (1 mark)
d) Eva decided to buy a house with Jorge, even though she knows he is terrible with money
and has a poor credit score. Eva has always been a saver while Jorge is a big spender
which is why they only have 10% as a down payment and require mortgage loan insurance,
which Eva had hoped to avoid. They also have a high interest rate on their mortgage due
to his poor credit card management (i.e. at capacity as he only pays the minimum amounts
each month). Provide Jorge with 3 ways that he can improve his credit score:
(.75 mark-.25 marks each)
1) __________________________________________________________________
2) __________________________________________________________________
3) __________________________________________________________________
Reasonable response
 Improve payment history by always making payments on time
 Pay in full or at least pay more than the minimum payment if can’t pay in full;
 Call lenders right away if trouble paying a bill to help with potential financing arrangements.
 Do not skip a payment even if a bill is in dispute.
 Do not go over your credit limit as going over the authorized limit on a credit card can lower
your credit score).
 Limit the number of credit applications or credit checks.
 Keep balance low relative to your available credit limit (keep credit utilization under 30%).
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 (estimated)
TABLE D
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
2020
$26,500
2020
$27,230
2021
$27,830
2022
$29,210
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TABLE E
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 F
Time Value of Money Formulas
Simple Interest
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:
FV = Maturity value or Future value
PV = Principal or Present value
PMT = Periodic annuity payments
n = Number of compounding periods per year
i = Annual interest rate
t = Time (in years)
EY = Effective yield
Simple interest:
I = Interest earned
P = Principal or Present Value
r = annual interest rate
t = time (in years)
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