(b) John is going to retire in 10 years. He is planning to build a retirement fund that he would like to receive at the end of 10 years from now. Company X offers a package of two investment opportunities - A1 and A2. John will have to make separate investments in A1 for 10 years and A2 for 5 years. The investment in A1 should start now, however the investment in A2 will start in 6th year. Both investments (A1 and A2) will mature at the same time at the end of 10th year. The details of the A1 and A2 investment plans are as follows: Investment A1: The required investment at present is $80,000.00 which will go through 4 following phases (phase 1 to 4) in next 10 years. At the end of each phase the entire fund will automatically be rolled over to the next phase for re-investment. The investment will mature at the end of phase 4. The 4 phases are as follows: Phase 1: During the first 2 years the investment will earn 12% p.a. simple interest, then roll over to phase 2; Phase 2: In the following 3 years the investment will earn 12% p.a. compounding monthly, then roll over to phase 3; Phase 3: In the following 3 years the investment will earn 8% p.a. compounding annually, then roll over to phase 4; Phase 4: The final 2 years of the investment will earn 10% return p.a. compounding daily. The investment matures at the end of phase 4. Investment A2: This investment is spread over 5 years. It will commence in the 6th year of the 10 year investment plan. A2 requires an investment of $10,481.00 at the end of each quarter for 5 years, which will earn a 12% p.a. return compounding quarterly. (b) John is going to retire in 10 years. He is planning to build a retirement fund that he would like to receive at the end of 10 years from now. Company X offers a package of two investment opportunities - A1 and A2. John will have to make separate investments in A1 for 10 years and A2 for 5 years. The investment in A1 should start now, however the investment in A2 will start in 6th year. Both investments (A1 and A2) will mature at the same time at the end of 10th year. The details of the A1 and A2 investment plans are as follows: Investment A1: The required investment at present is $80,000.00 which will go through 4 following phases (phase 1 to 4) in next 10 years. At the end of each phase the entire fund will automatically be rolled over to the next phase for re-investment. The investment will mature at the end of phase 4. The 4 phases are as follows: Phase 1: During the first 2 years the investment will earn 12% p.a. simple interest, then roll over to phase 2; Phase 2: In the following 3 years the investment will earn 12% p.a. compounding monthly, then roll over to phase 3; Phase 3: In the following 3 years the investment will earn 8% p.a. compounding annually, then roll over to phase 4; Phase 4: The final 2 years of the investment will earn 10% return p.a. compounding daily. The investment matures at the end of phase 4. Investment A2: This investment is spread over 5 years. It will commence in the 6th year of the 10 year investment plan. A2 requires an investment of $10,481.00 at the end of each quarter for 5 years, which will earn a 12% p.a. return compounding quarterly
