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Question 2 Olga lives at home with her mother, father, and sister. She recently started a job and is planning to move into her own
Question 2 Olga lives at home with her mother, father, and sister. She recently started a job and is planning to move into her own flat. She wants to buy a flat five years from now, knowing that she will need a deposit of at least 14,500 in order to do so. Olga has just received a sum of 3,500 from a trust fund her parents set up for her when she was a baby. She has deposited the 3,500 into a savings account. 2.1 If Olga uses all her savings and saves 150 per month, what rate of return will she need to reach her target of 14,500 after three years? (3 marks) 2.2 Olga has seen that shares (equities) in a particular high-tech start-up company have given a 10 per cent return each year, over the past two years. She is considering using all her trust fund money to buy shares in this company. Give two reasons why investing in a tracker fund may be a better strategy than investing all her trust money in the high-tech company. (4 marks) 2.3 Olga can obtain a rate of return on her savings that will enable her to reach the target deposit, if she commits to a savings plan that runs for seven years (rather than five) with no scope for early withdrawals. Identify two financial disadvantages of waiting an extra two years before offering the deposit to buy a first home. (4 marks) 2.4 How will Olgas efforts to save for a deposit be affected if there is a sharp rise in interest rates which causes a fall in house prices? (4 marks) (Total marks available for Question 2: 15 marks)
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