Question

Suleman plans to fund his retirement plan and targeting to get OMR 50,000 at the end...

Suleman plans to fund his retirement plan and targeting to get OMR 50,000 at the end of 9th year, with the maximum investment of OMR 1500 at the end of each year for the next 9 years. If Mr. Suleman can earn 12% on his investment, how much will he have at the end of the 9th year? Write you maximum recommendations to Mr. Suleman regarding this investment plan

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Answer #1

Future value is computed as shown below:

Future value = Annual Investment x [ [ (1 + r)n – 1 ] / r ]

= OMR 1500 x [ [ (1 + 0.12)9 - 1 ] / 0.12 ]

= OMR 1500 x 14.77565631

= OMR 22,16348 Approximately

The annual investment he should make to get OMR 50,000 is computed as follows:

Future value = Annual Investment x [ [ (1 + r)n – 1 ] / r ]

OMR 50,000 = Annual Investment x [ [ (1 + 0.12)9 - 1 ] / 0.12 ]

OMR 50,000 = Annual Investment x 14.77565631

Annual investment = OMR 50,000 / 14.77565631

Annual investment = OMR 3,383.94 Approximately

So, we shall recommend Mr. Suleman that he should invest OMR 3,383.94 annually instead of OMR 1,500 to get OMR 50,000 at the end of 9 years.

Feel free to ask in case of any query relating to this question      

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