1. Ms. Darko is the Finance Officer of Grace Ltd. She has proposed two investment plans to management/Plan A requires a deposit of US$6,000 every six months, with an interest receivable at a 5 % annual rate, compounded semi-annually. Plan B requires a deposit of US$8,000 yearly, with an interest rate of 7.5 % compounded annually. The initial deposit in Plan A would be made six months from now, and that of Plan B in a year’s time.

(a) What is the future value of Plan A at the end of five years?

(b) What is the future value of Plan B at the end of five years?

(c) Which plan should management approve, assuming management’s only concern is the value of the investment at the end of five years?

(d) Would management’s choice of plan change if the rate of interest in Plan B were 6.5 %?