1. Ahmad saw an advertisement of a condominium in Kuala Lumpur with a list price of RM300,000.00. Ahmad is 30 years old and will retire at age 55. Housing prices in Kuala Lumpur generally increase at the overall rate of inflation. He is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of the condominium when he retires. Inflation is expected to average 4% per year for the next 25 years. How much must each deposit be so Ahmad will have enough money in his savings account to buy the retirement home when he retires if he can earn 7% annually on his investment?
1. Ahmad saw an advertisement of a condominium in Kuala Lumpur with a list price of RM300,000.00. Ahmad is 30 years old and will retire at age 55. Housing prices in Kuala Lumpur generally increase at the overall rate of inflation. He is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of the condominium when he retires. Inflation is expected to average 4% per year for the next 25 years. How much must each deposit be so Ahmad will have enough money in his savings account to buy the retirement home when he retires if he can earn 7% annually on his investment?
2.Julia has just graduated from high school and has received a best student award for RM5,000.00. She would like to deposit the money in an interest earning account until she graduates from college (i.e., four years from now). In her search for the highest interest earning account, she has narrowed the list down to the following two accounts: 1) bank A pays 9 percent interest compounded annually, and 2) bank B pays 8 percent interest compounded semiannually. Which is the better offer, and how much will Julia have upon graduation from college?
3.The Football Association would like to accumulate RM10,000.00 by the end of 4 years from now to finance a big soccer weekend for its members. The Association currently has RM2,500,00 and wishes to raise the balance by arranging annual fund-raising events. How much money should they raise at each annual fund-raising event assuming 8 percent rate of interest?
4. Aishah is planning to attend college when she graduates from high school 7 years from now. She anticipates that she will need RM10,000.00 at the beginning of each of the four college years to pay for tuition and fees, and have some spending money. Aishah has made an arrangement with her father to do the household chores if her dad deposits RM3,500.00 at the end of each year for the next 7 years in a bank account paying 8 percent interest. Will there be enough money in the account for Aishah to pay for her college expenses? Assume the rate of interest stays at 8 percent during the college years.
5. Halim has opened a retirement fund account which pays 7 percent interest and requires RM5,000 annual deposits. Halim will retire in 15 years and expects 10 years of retirement life. What is the maximum annual retirement benefit Halim can get during his retirement years?
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