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a) Suppose you want to have RM 0
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?
Expert Solution
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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