Question
1. James is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to
1. James is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to retire from full-time work at the age of 55 with $2 000 000 in savings.
a) How much will James need to contribute at the end of each month in order to receive $2 000 000 in 30 years time at a compound interest rate of 7.25% p.a.? (3 marks)
Show formula, variables, calculation and a concluding statement in your response.
b) How much will James need to contribute at the start of each month in order to receive $2 000 000 in 30 years time at a compound interest rate of 7.25% p.a.? (2 marks)
Show formula, variables, calculation and a concluding statement in your response.
c) Explain why there is a difference between the two amounts determined in parts a) and b)? (2 marks)
2. Domenic is 20 years old and wishes to secure his future by saving $300 per week into an investment that pays 6.25% p.a. compounding weekly. He is looking forward to a career in Accounting and is hoping to work in the industry for 30 years before retiring at age 50 (30 years from now).
a) How much will Domenic have in retirement savings if he contributes the $300 at the end of each week? (2 marks)
Show formula, variables, calculation and a concluding statement in your response.
b) How much will Domenic have in retirement savings if he contributes the $300 at the start of each week? (2 marks)
Show formula, variables, calculation and a concluding statement in your response.
c) Explain why there is a difference between the two amounts determined in parts a) and b)? (2 marks)
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