a) How much is the annual interest rate, assuming compounding annually Molly should aim at if she chooses to invest her $120 000 in a saving account to get the $450,000 ready in just 10 years from now? b) Calculate the monthly payment Molly needs to contribute into ANZ Investment Fund to get $330,000 after 15 years in Investment 2?
You are a young personal financial adviser. Molly, one of your clients approached you for
consultation about her plan to save aside $450,000 for her child’s higher education in United
States 15 years from now. Molly has a saving of $120,000 and is considering different alternative
options:
Investment 1: Investing that $120,000 in a saving account for 15 years. There are two banks for
her choice. Bank A pays a
pays a rate of return of 8.45 annually, compounding quarterly.
Investment 2: Putting exactly an equal amount of money into ANZ Investment Fund at the end
of each month for 15 years to get 330 000 she still shorts of now. The fund is offering a rate of
return 7% per year, compounding monthly.
Required:
a) How much is the annual interest rate, assuming compounding annually Molly should aim at if
she chooses to invest her $120 000 in a saving account to get the $450,000 ready in just 10 years
from now?
b) Calculate the monthly payment Molly needs to contribute into ANZ Investment Fund to get
$330,000 after 15 years in Investment 2?
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