After graduation, you plan to work for Megah Sdn Bhd for 12 years and then start your own business. You expect to save and deposit RM1,000 a year for the first 6 years and RM2,000 annually for the following 6 years. The first deposit will be made a year from today and the account earns 9% compounded annually. In addition, your grandfather just gave you a RM25,000 graduation gift which you will deposit immediately. You want to buy a house after 8 years working and make it as a deposit of RM100,000. You also plan to invest in securities that pay 8.0%, compounded semi-annually with initial investment of RM5,000. After few years of working, you plan to go to Europe 5 years from now. Therefore, you save another RM3,600 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year.

Required:

1. If you invest RM5,000 today, how many years will it take for your investment to grow to RM12,000 at 8%, compounded semi-annually?

A. 22 years.

B. 13 years.

C. 11 years.

D. 5.7 years.

2. What rate of interest must you earn on your investment to cover the house deposit?

A. 19%.

B. 22%.

C. 25%.

D. 12%.

3. If you cancel your plan for buying house and vacation, and you invested all the money at 9% per year. How much is the differences of money you can accumulate if you use for your business 12 years from now?

A. RM33,855.

B. RM60,650.54.

C. RM94,505.54.

D. RM33,600.

4. Which of the following has the lowest effective annual return?

A. An account that pays 8% nominal interest with monthly compounding.

B. An account that pays 8% nominal interest with annual compounding.

C. An account that pays 7% nominal interest with monthly compounding.

D. An account that pays 8% nominal interest with daily (365-day) compounding.

5. When comparing annuity due to ordinary annuities, annuity due annuities will have higher ______________.

A. present values.

B. annuity payments.

C. future values.

D. both A and C.