Question

Time Value of Money

1. En. Ahmad invested Rm50,000 in a mutual fund 5 years ago. The
fund provided

compounded rate of return of 7% p.a over the last 5 years. What is
the value of En.

Ahmad’s investment now?

2. Johnny has a child whose education plan requires RM500,000 to
finance the

completion of his tertiary education 10 years from today. Johnny
has set aside

RM200,000 for this purpose. He wants to know what investment rate
of return is

required over the next 10 years that will enable him to meet the
financial goal?

3. Mr. Muthusamy has RM60,000 now and hopes to have RM150,000 for
retirement 8

years later. What rate of return will enables him to meet his
financial target?

4. How long Mathews needs to wait before his existing RM50,000 grow
to become

RM150,000 if it is parked in an investment vehicle with annual rate
of return of 6%.

5. Mary agrees to set aside RM5,000 in an investment vehicle every
year for a period of

10 years. The rate of return is 7% p.a.. How much will be available
after period of 10

years?.

6. Kenny wishes to have RM200,000 in 15 years to meet his child’s
cost of education in

a local college. He can afford to set aside RM5,000 every year
starting immediately.

The return on investment is 7% p.a. Based on the regular wealth
accumulation

programme, is Kenny able to meet its objective?. How much should
Kenny saves every

year for him to achieve his target?.

7. Mr. Eastwood plans to place RM75,000 in a fixed deposit account
with interest rate of

4% p.a. The fixed deposit pay interest every quarter but the amount
is re-deposited

to earn interest. He wishes to know how much money is available
after 10 years

Answer #1

Answer to Question 1:

Amount invested = 50,000

Rate of return = 7%

Period = 5 years

Value of investment = Amount invested * (1 + Rate of
return)^Period

Value of investment = 50,000 * 1.07^5

Value of investment = 70,127.59

Answer to Question 2:

Amount deposited = 200,000

Desired sum = 500,000

Period = 10 years

Desired sum = Amount deposited * (1 + Rate of
return)^Period

500,000 = 200,000 * (1 + Rate of return)^10

2.50 = (1 + Rate of return)^10

1.0960 = 1 + Rate of return

Rate of return = 0.0960 or 9.60%

When Jim retires at age 67, he wishes to withdraw all his
superannuation as a lump sum and use that to invest in an annuity
that pays him $80,000 each year for 15 years. This $80,000 income
comprises of part principal draw down on the lump sum he invested
and part interest he earns from the return on his lump sum. Jim can
earn a 4% p.a. return on his lump sum investment. By the final
year, he will have...

1)Nicole wants to accumulate $ 8,000 at the end of 5 years
making equal money deposits at the end of each year for the next 5
years. If Nicole can earn 7% of her investments, how much should
she deposit at the end of each year to meet her goal (accumulate $
8,000)?
2)Mr. Roman wants to determine how long it will take for an
initial deposit of $ 10,000 to double.
a)If Mr. Román earns 10% annual
interest on...

1. Mark decided to save R5 every time his parents get paid and
give him pocket money. His parents get paid at the beginning of
every second week and give pocket money to each of their children
immediately. Mark would earn 3% per week on his funds. If Mark
commits to set aside the funds for 2.5 years, How much will Mark
receive at the end of the 2.5 years?
2. Shopeasy's earnings and dividends have been growing at a...

1) How much money will you accumulate by the end of 30 years if
you invest $200 per month and you start out with $30 000 in the
bank? Assume the interest rate your money earns is 8% per year and
you start saving next month.
a) $55 505
b) $30 000
c) $628 131
d) $626 144
2) How much is the monthly payment on a $250 000 loan for 15
years at 10% interest per year? Assume first...

1. John invested $20,000 fifteen years ago with an insurance
company that has paid him 8 percent (APR), compounded quarterly
(every 3 months). How much interest did John earn over the 15
years? a. $2,416.08 b. $45,620.62 c. $24,000.00 d. $28,318.95 e.
$65,620.62
2. You are running short of cash and really need to pay your
tuition. A friend suggests that you check out the local title pawn
shop. At the shop they offer to loan you $5,000 if you...

*FOR THIS HOMEWORK ASSIGNMENT, YOU MUST SHOW ALL WORK
(CALCUATIONS) AND DRAW TIME LINES.
5) You want to purchase a condo for $250,000. You have $50,000
to put down and you will take out a 20 year mortgage at 4%
interest. What is your monthly mortgage payment?
6) After taking a finance course, you are serious about
developing a MONTHLY plan to save and invest. You are 22 years old
and want to retire at 62 years old with 1.5...

What is the present value of $10,000 to be received 10
years from today, assuming a 6 percent annual interest (discount)
rate?
2. If you
deposit $3,000 in a bank account that pays 4 percent annual
interest, what would your account balance equal after 9
years?
3. To
settle a wrongful death case, a judge ordered the maker of a
defective product to pay the spouse of the deceased person $100,000
today, $150,000 four years from today, and $250,000 eight...

Kramerica Industries, Inc. wants to invest $140,000 of extra
money received from overseas sales of its old assets. How much
money will it have at the end of 10 years if the investment fund it
chooses guarantees the yearly return rate of 20% compounded
annually?
Vandalay Industries, Inc. anticipates big growth in business
and has to start planning its future expansion. The company will
need $220,000 in 8 years to purchase space for the new factory in
another state. How...

****FOR THIS HOMEWORK ASSIGNMENT, YOU MUST SHOW ALL WORK
(CALCUATIONS) AND DRAW TIME LINES.
1) Jane is 25 years old and was able to save
$25,000. After doing some research, she
identifies a stock called HPG Industries that has a dividend yield
of 7% that has been consistent for the past 10 years. Based on this
information, she decides to invest in this stock. Considering that
HPG Industries pays the dividend consistently, how many years will
it take for Jane...

1. For the next 6 years, you pan to make equal quarterly
deposits of $600.00 into an account paying 8% compounded quarterly.
How much will be the total you have at the end of the time?
2. How much money will you have to deposit now if you wish to
have $5,000 at the end of 8 years. Interest is to be at the rate of
6% compounded semiannually?
3. In the California “Million Dollar Lottery” a winner is paid...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 21 minutes ago

asked 44 minutes ago

asked 52 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago