0.4845 QUESTION 3 Suppose Mr. Rokotoo informed you that he will be going on retirement in...
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0.4845 QUESTION 3 Suppose Mr. Rokotoo informed you that he will be going on retirement in 5 years from now. He wants to increase his regular contributions for the remaining periods. At the beginning of the 1st year, he contributed GHS 1,200 and GHS 1,450 at the beginning of the 2nd year. He increases the contributions to GHS 2,800 at the beginning of 3rd year and to GHS 3,508 at the 4th year. Towards the end of the 5th year, he could not contribute any amount but he rather withdrew GHS 7,547 to settle emergence request. The frequency of the interest rates for various years are such that they kept varying. In year 1, it was 18.5%; year 2, it was 17.25% and year 3, it was 16.15% and the year 4, it was 16.95%. (i) Using the simple interest rate, calculate the future value of Mr Rokotoo and explain your results in relation to the effect of the withdrawal he made getting to the end of the period. (4 Marks) Using the compound interest, compute the future value for Mr Rokotoo and what advice would you give to Mr Rokotoo. (5 Marks) Calculate the quarterly compounded future value of Mr Rokotoo and consider the situation that he roll-over the funds at the beginning of the 5th year to the year end at a T-bill rate of 13.5% without making any withdrawal. (iv) Distinguish between: (5 Marks) (ii) (iii) a) Securities market and capital market b) Collective investment schemes and repurchase agreement Page 2 of 3 (2 Marks) (2 Marks) 0.4845 QUESTION 3 Suppose Mr. Rokotoo informed you that he will be going on retirement in 5 years from now. He wants to increase his regular contributions for the remaining periods. At the beginning of the 1st year, he contributed GHS 1,200 and GHS 1,450 at the beginning of the 2nd year. He increases the contributions to GHS 2,800 at the beginning of 3rd year and to GHS 3,508 at the 4th year. Towards the end of the 5th year, he could not contribute any amount but he rather withdrew GHS 7,547 to settle emergence request. The frequency of the interest rates for various years are such that they kept varying. In year 1, it was 18.5%; year 2, it was 17.25% and year 3, it was 16.15% and the year 4, it was 16.95%. (i) Using the simple interest rate, calculate the future value of Mr Rokotoo and explain your results in relation to the effect of the withdrawal he made getting to the end of the period. (4 Marks) Using the compound interest, compute the future value for Mr Rokotoo and what advice would you give to Mr Rokotoo. (5 Marks) Calculate the quarterly compounded future value of Mr Rokotoo and consider the situation that he roll-over the funds at the beginning of the 5th year to the year end at a T-bill rate of 13.5% without making any withdrawal. (iv) Distinguish between: (5 Marks) (ii) (iii) a) Securities market and capital market b) Collective investment schemes and repurchase agreement Page 2 of 3 (2 Marks) (2 Marks)
Expert Answer:
Answer rating: 100% (QA)
i To calculate the future value of Mr Rokotoos contributions using the simple interest rate we need to apply the formula Future Value Principal Principal x Interest Rate x Time For year 1 Principal GH... View the full answer
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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