Case Study 4

Assume that you are currently 8 years old andhave the following financial information that is related to you:

(i)Your parent has just set-up a trust account of RM5,000 for you. The fund manager promises to earn an average of 5 percent return annually at the end of each year. The investment returns will be reinvested back to the investment account.

(ii)Besides setting up the trust account, your parent also deposits RM310 at the beginning of each month into an investment account that will earn an average annual return of 6 percent for your future education usage.

(iii)You are the only child in the family and because of that, your grandparent has decided to set-up additional education funds by deposit RM500 at the beginning of each year that earns 6% annually.

(a)You are required to determine the total amount of wealth you will able to accumulate when you reach 18 years old.( 7 marks)

(b)ProposedTHREE (3)ways on how you can accumulate higher wealth in the future.( 3 marks)