QUESTION 2 (18 marks)

Monalisa is 35 years old and is drawing a monthly salary of RM4,000.00 in a government department. Her salary is expected to increase at an average rate of 6% per annum until retirement at age 60. In addition, it is assume that she needs 70% of his last drawn salary as first year annual income which shall go up in subsequent year at assumed inflation rate of 3% during retirement. Monalisa will park her retirement fund in an account that generates return of 5%. She is expected to live for another 30 years during retirement. It is assumed that the retirement gratuity will be used to cover some part of the retirement gap.

REQUIRED

Calculate the first year annual income,Calculate the lump sum need based on capital liquidation approac,Calculate the value of pension fund at retirement age,Calculate the retirement gap ,Calculate the retirement gratuity , If it is assume that the retirement gratuity will be used to fill up the retirement gap, how much is the monthly instalment that Monalisa have to pay if she decided to invest in a financial instrument with 7% rate of return per year?