You are considering investing in a scholarship fund for your daughter. The fund operates in the following way: Starting in one months time you would make regular monthly deposits of $50 for a period of eight years into a scholarship fund. Immediately after your final deposit, the fund would pay $10,000 to your daughter to help her with expenses when she commences university study.

a)Illustrate this scenario as a fully labeled timeline diagram. [2 marks]

To be able to compare this fund with other possible investments, you need to know the effective interest rate, j12, that this fund returns.

b)Derive and present the equation of equivalence that is appropriate for this scenario. Do NOT seek to simplify the expression, but rather leave $10,000 as the value of the left-hand side (LHS). [Hint: This is a Price is Right problem but with an FV.] [4 marks]

c)Using an estimate of i=1%, determine the value of the right-hand side (RHS) of the equation of equivalence. Enter this value to 2 decimal places as an answer to Assignment 1 Milestones question 1c.