(10 marks)

Five years ago, Michael began saving for his daughter's education in Australia by investing a lump sum of $50,000 in a financial asset with a yearly return of 12.5%, compounded monthly.

Required:

1. Calculate the effective annual interest rate (EAR) of this investment (2 marks)

2. Determine the current amount of money accumulated by Michael's investment portfolio

(4 marks)

3. If Michael's goal is to have a total of $100,000 for his daughter's education, how much time will he need to reach this target, given an annual interest rate of 13% compounded yearly?

(5 marks)