a. Define interest on interest and how to calculate it.

b. By applying the question 1(a), how much interest is earned at the end of 5 years with amount of deposit RM100,000, 4% per year compounded continuously.

QUESTION 2

a. Classify 3 motives for a business to hold cash.

b.Explain the following money market instruments and provide example of documents.

2. Treasury bill
4. Commercial paper
6. Negotiable certificate of deposit (CDs)
8. Bankers Acceptance

c. As financial manager, the role is to manage the cash shortage. DiscussTHREE (3)ways to overcome cash shortage by giving example for each.