Question no 01:Marks (20)

Mr. Ahmed has just received his Bonus and he is looking for a suitable investment option that will repay him in long term. He has consulted his friend to invest RS 100,000 out of his Bonus amount. His friend has suggested following two options:

Option 1:

Investing RS 100,000 at compounded monthly interest rate for 10 years (12% annually for first 5 years and 14% annually for remaining).

Option 2:

Depositing half of investment amount in a saving accountfor 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.

Required:

Calculate the value of both investment options

Based on the calculation of part 1, which option Mr. Ahmed should select and why?

Question no 02:Marks (20)

A.Suppose you are going to deposit Rs 15,000 in MCB savings account, Rs 25,000 in UBL savings account and RS 30,000 in MEZAAN BANK savings account at compounded semiannually and simple annually interest rate of 5%, 7% and 9% respectively. For 5, 10, and 20 years calculate the future value for each deposit.

B.Suppose you need RS 6,400 form MCB savings account with 5% annual interest rate after 5 years, RS 49,743 from UBL saving account with 7% annual interest rate after 10 years and RS 1,74,489 form MEZAAN BANK saving account with 9% annual interest rate after 20 years. Using compounded semiannually interest calculate the present value for each amount.