(TIME VALUE OF MONEY)

QUESTION 5

a) Suppose you borrow RM18,000 education loan from Standard Charted Bank. Payments are being made in installments at the end of each year. You borrow for 7 years at an interest rate of 8% per annum. Determine the amount that you will have to pay for each year for 7 years? (4 marks)

b) Yusri won a grand contest organized by Malaysian Academy. He was given two choices:

i) To collect RM100,000 a year for 4 years, or

ii) To collect RM50,000 a year for 10 years.

If the amount is discounted at 10%, which alternative is the best? (8 marks)

c) Nurul must have RM20,000 in order to continue her degree. To achieve the goal, Nurul plans to save RM1,200 per year in her savings account with a bank that pays 10% annual interest. How many years will it take if the first payment being made a year from today? (Do interpolation) (6 marks)