Question

Question A2

(a) Mrs Wong changes employers at age 46. She’s given RM8500 as her vested benefits in the company’s pension plans. She invests this money in a registered retirement savings plan paying 8% annual interest, and leaves it there until her ultimate retirement at age 60. She plans 25 annual withdrawals from this fund, the first on her 61st birthday. Find the size of these withdrawals.

(b) A parcel of land valued at $35,000 is sold for a down payment of $15,000. The buyer agrees to pay the balance with interest rate of 12% compounded monthly by paying $500 per month, as long as necessary. The first payment is due 2 years from now. Find the number of payments needed to settle the borrowed amount and also the value of the final payment?

(c) The Andersons borrow $15,000 to buy a car. The loan will be repaid over three years, with monthly payments at 6% interest compounded monthly. Find the total interest paid in 12 months of the second year.

Answer 1

2.

a) total RM 8500

Interest annually 8% for 14 years

Total fund will be 8500+ 8500*8%*14 = 18020

Total 25 withdrawals.

Size of withdrawal will be = 18020/25 = 720.80

b) value of land = 35,000

Down payment = 15,000

Rest amount = 20,000

Payment will be done @12% compound interest at 500

31 payments will have to made to meet 20,000

Last payment will be 175

c ) borrows 15,000

6% interest rate compounded monthly for 3 years

Total interest for 2nd year will be = 982.23