Question
Five years ago Peter had started his saving for his childrens higher education by putting a lump sum of $25,000 into an investment instrument on
Five years ago Peter had started his saving for his childrens higher education by putting a lump sum of $25,000 into an investment instrument on the securities market. The investment has been paying a rate of returns of 12.3% per year, compounding monthly. Required: a. Calculate how much money has Peter accumulated from his investment now? (3 marks) b. If Peters initial investment was $30,000 and he had obtained the same investment outcome after five years, how much should have been the actual rate of return, assuming compounding annually for his investment ? (4 marks) c. If Peter would like to have totally $60,000 for his childrens higher education and moves all the saving accumulated from current investment after five year to another instrument that pays the interest rate of 13.5% per year, compounding annually. How long will it take for Peter to reach his target of $60,000?
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