Suzan has started university with an initial savings of $5000. She has been awarded 4-year scholarship and will receive $1000 per month, end of each month. She noted that the current market interest rate on loan is 12.5% p.a. compounded yearly. Suzan found a single flat to rent with an agreement to pay monthly rent of $250 (to be paid at the beginning of each month), with no binding contract or bond payment. Suzan did her monthly budgeting and noted that her net savings per month is $300 every month-end. She negotiates a 4-year saving plan with her local banker which agrees to give an annual compound rate of 5% p.a. on her monthly savings, and 2.5% p.a. simple interest on her initial savings. Moreover, Suzans landlord has given her the option to pay a single sum of $11,150 as rent for the entire 4-years or make a monthly payments of $250 as agreed.

a) Calculate Suzans total savings at the end of 4 years. [10 marks]

b) Using the rate of 4% p.a. compounded monthly, determine whether it is better to pay the single sum of $12,000 to cover for the 4 years of rent or make a regular monthly payment of $250 as agreed? [10 marks]

c) List two factors could support Suzans decision in part b [5 marks]