QUESTION 3
	a	You are planning to retire in 10 years’ time and buy a bungalow house. Presently, the house costs RM 500,000 and is expected to increase in value each year at the rate of 8%. Suppose you can earn 14 % annually on your investments, how much must you invest at the end of each of the next 10 years to be able to buy your dream house when you retire? (6 marks)
	b.	Fernando Torres purchased a car for RM 100,000. He paid RM 25,000 upfront and agreed to pay the rest over the next 12 years in 12 equal payments which include principal payments plus 5% compound interest on the unpaid balance. Determine the amount of the equal payments. (4 marks)
	c.	Mei Ling is planning to purchase the terrace house using proceeds from the sale of her apartment in 8 years from now. Her apartment is currently worth RM120,000 and its value is growing at 6 percent a year. The terrace house is currently worth RM320,000 increasing at 7 percent per year. In addition to the value of this property, calculate how much additional money should she deposits at the end of each year in an account paying 10 percent annual interest in order to be able to buy the terrace house after 8 years. (6 marks)
	d.	Alya has invested RM 220,000 in an account earning 4% interest. How much she can withdraw in equal amounts each year if the balance in the account will be zero at the end of the 9th year. (4 marks) (Total 20 marks)

Answer rating: 100% (QA)

a There are a few ways to approach this problem but one way to think about it is in terms of a series of annuities At the end of each year for the nex... View the full answer