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Homework answers / question archive / You have 5,000 you want to invest for the next 45 years until retirement

You have 5,000 you want to invest for the next 45 years until retirement

Finance

You have 5,000 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years. Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year. (5 marks) Suggest how you can minimise the amount of cash you must invest in order to reach your retirement goal.

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For the Present value of RM 1000 to be received in a year ,’

We use the TVM consideration to plot the graph of the different PV with the interest rates %

So the

PV = FV/( 1+r) ^ 1

Since the time is 1 yr , it is fixed

SO the PV table is

Interst rates %

PV

1%

990.099

2%

980.392

3%

970.874

4%

961.538

5%

952.381

6%

943.396

7%

934.579

8%

925.926

9%

917.431

10%

909.091

11%

900.901

12%

892.857

13%

884.956

14%

877.193

15%

869.565

16%

862.069

17%

854.701

18%

847.458

19%

840.336

20%

833.333

Now we plot the graph as PV in the Y axis and rates in the X Axis as

please see the atteched file

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