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Homework answers / question archive / a) Suppose you want to have RM 0

a) Suppose you want to have RM 0

Finance

a) Suppose you want to have RM 0.5 million saved by the time you reach age 30 and suppose that you are 20 years old today. If you can earn 5% on your funds, how much would you have to invest today to reach your goal?

b) If you deposit RM 150 in an account that pays 5% interest, compounded annually, how much will you have at the end of 10 years? 50 years? 100 years?

c) How much would I have to deposit in an account today that pays 12% interest, compounded quarterly, so that I have a balance of RM 20,000 in the account at the end of 10 years?

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a)
Present Value=Future Value/(1+r/m)^(m*n)
=0.5*10^6/1.05^10=306956.62677038

b)
Future Value of annuity=Annuity/rate*((1+rate)^n-1)

10 years
=150/5%*(1.05^10-1)=1886.68388033232

50 years
=150/5%*(1.05^50-1)=31402.1993572611

100 years
=150/5%*(1.05^100-1)=391503.773538911

c)
Present Value=Future Value/(1+r/m)^(m*n)
=20000/(1+12%/4)^(4*10)=6131.13681547614

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