QUESTION 1 1.

Calculate the annual rate of return for an investment that give a return of RM20,000 after 18 years, with a cost of investment RM2,600.78?

FVA 20,000 PVIFA i, 18

= = = =

PMT (PVIFA i,n) 2,600.78(PVIFA i, 18) 20,000.00 / 2,600.78 7.6900

Refer Table

= n 18, i 7.6900 = 12%

2. (i)

Ah Seng planning to invest in Amanah Saham Wawasan that give him a return of 12 percent annually, with a return of RM 50 per month for the whole life, started next month. What is the value of the investment today? RM50.00/ 0.01 RM5,000.00

(ii)

Calculate the balance at year six(6), if Ah Seng intend to invest RM100 today, RM250 a year from now, RM150 at year two (2) until year four (4) and planning to withdraw 50 percent of the saving at year five (5). The bank offer an interest of 8 percent, compounded annually.

0 i = 8% 1 2 3 4 5 6 |________|________|________|_______|_______|________| | | | | | | | | 100 250 150 150 150 FV 6 =?

FV5

= = =

100(1.08)5 + 250(1.08)4 + 150 (FVIFA 8, 3) (1.08) 146.93 + 340.12 + 525.92 RM1,012.97

3.

= PV (1.08) = 0.5 (1,012.97)(1.08) = RM547.0 Arman will be finished studying in four years and would like to open a restaurant. He estimates that he will need RM50,000 at the end of year four to open the restaurant. He wants to make semi annual payments into an account at the end of each period and estimate that the return that he can get is 16 percent over the next four years,

FV6

How much must Arman save at the end of each period? FV A = PMT (PVIFA i =8%, n = 8) RM50 000 = PMT (10.67) use table PMT = RM50 000 / 10.67 = RM4,686.03

4.

Ah Mooi uses a credit card from Bank Kawan Berhad for her shopping expenses. The bank has charges her 1.5% monthly interest on outstanding amount. What is the bank annual percentage rate (APR) and effective annual rate (EAR).

APR

= 1.5% x 12 = 18% = (1 + APR/m) 1 = (1 + 0.18/12) - 1 = 19.56%

EAR