Question
You have RM3,000 to invest today at 6 percent interest compounded annually. (i) How much will you have accumulated in the account at the end
You have RM3,000 to invest today at 6 percent interest compounded annually.
(i) | How much will you have accumulated in the account at the end of the following |
number of years: - 2 years | (6 marks) |
- 4 years - 6 years
(ii) | Use your computations in part (i) to calculate the amount of interest earned in: (6 marks) |
- the first 2 years (years 1 to 2) - the second 2 years (years 3 to 4) - the third 2 years (years 5 to 6) (b) Mr Brown just won a lotto that promises to pay RM3 million exactly 15 years from today. Because the RM3 million payment is guaranteed by the state in which he lives, opportunities exist to sell the claim today for an immediate lump-sum cash payment. What is the least he will sell his claim for if he could earn the following rates of return
on similar-risk investments during the 15-year period? | (6 marks) |
(i) (ii) (iii) | 5% 7% 9% |
(c) Calculate the following: -
(i) (ii) (iii) | future value of a 3-year ordinary annuity of RM100 at 15%. (1.5 mark) present value of a 3-year ordinary annuity of RM100 at 15%. (1.5 mark) future value of a 3-year annuity due of RM100 at 15% (with reference to using |
your answer in part (i)). | (2 marks) |
(iv) | present value of a 3-year annuity due of RM100 at 15% (with reference to using |
your answer in part (ii)). | (2 marks) |
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