Question 4 (16 marks)

a. Identify the key factors that a person should consider before beginning an investment programme. (5 marks)

b. Mike is considering an investment that will pay him $12,000 per year at the end of each year for the next 10 years. If Mike requires a 8% rate of return, what is the most Mike will pay for this investment? Show all your calculations. (4 marks)

c. Auntie Gaga put some money in a saving account for you on the day you were born. You are now 19 years old and are allowed to start managing and withdrawing money from that saving account. Currently, the saving account has $80,000 and pays 7% interest rate per year. (7 marks)

i. How much money would be in the saving account if you leave the money there until your 25th birthday.

ii. How much money would be in the saving account if you leave the money there until your 60th birthday.

iii. How much money did Auntie Gaga originally put in the account?

Show all your calculations