(a) Why does money have a time value? Does inflation have anything to do with making a ringgit today worth more than a ringgit tomorrow? (4 marks)

(b) Discuss the present value of an annuity with an example. (8 marks)

(c) You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive RM20,000 at the end of each year for 30 years. You know that you will be able to earn 11% per annum during the 30-year retirement period.

(i) How large a fund will you need when you retire in 20 years to provide the 30-years, RM20,000 retirement annuity? (3 marks)

(ii) How much will you need today as a single amount to provide the fund calculated in part (i) if you earn 9% per annum during the 20 years preceding retirement? (3 marks)

(iii) What effect would an increase in the rate you earn both during and prior to retirement have on the vales found in parts (i) and (ii)? Explain. (4 marks)