Question 1: Calen Grisham is a 46-year-old pharmacist who works and lives in Carlton, Melbourne. Calen wants to buy a rural property on the outskirts of Ballarat, Victoria when he retires at age 60 and grow vegetables. The property he is currently looking at is priced $350,000 and is expected to grow in value each year at a 4% rate.

a) Bendigo Bank is offering Calen 6% interest p.a. compounded monthly. Assuming Calen opens an account with Bendigo bank and starts depositing a monthly amount, how much must he invest at the end of each month till he retires to be able to buy this property when he retires?

b) If Rabo Bank offers him 6.02% interest but compounded quarterly and Country Bank offers him 6.05% interest but compounded semi-annually, which bank should Calen invest, Bendigo, Rabo or Country Bank?

c) Now, consider your answer to part a, the amount Calen must save each month. Calculate what amount Calen must earn at a minimum each year if the savings equates to 28% of his pre-tax earnings.

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