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Annuity X : Is an annuity that makes six cash payments of RM13,500 at the beginning of each year. Annuity Y :Is an annuity that
Annuity X : Is an annuity that makes six cash payments of RM13,500 at the beginning of each year. Annuity Y :Is an annuity that makes six cash payments of RM15,000 at the end of each year Assuming that Mr. Akmal Rashid can earn 15% on both investments. 1. On a purely intuitive basis (without doing any calculations), which annuity do you think is more attractive? And why? (3 MARKS) 2. Find the future value after six years for both annuities. (6 MARKS) 3. Use your findings in part (2) above to indicate which annuity is more attractive and why? Compare your finding to your intuitive response in part (1) above. (2 MARKS) (b) Alice wishes to accumulate RM123,000 by making equal, end-of-year deposits over the next seven years. If Alice can earn 7% on her investments, how much does she deposit at the end of each year to meet this goal? Assume the investment is compounding semi-annually. (4 MARKS)
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