Question 2

(a) Brandon Lim has just graduated from Local University and secured a job as Business Development & Marketing Executive at Philip investment Company at KLCC. The company does not provide Brandon with a car, he has no choice but to purchase one for himself. After minus the daily expenses and hire purchase loan, Brandon Lim savings is RM800 a month as initial and he believe his savings will increase to RM2000 after 5 years working. As a financial planner, share with Brandon Lim the important of having insurance endowment annuity plan with below assumption.

Assume annual deposits of RM4,800 for the first 10 years, RM8,400 for the next 15 years and RM24,000 for the last 5 years have been made by Brandon Lim at the beginning of each year into the endowment annuity policy fund for the next 30 years. During this period, the interest earned on the deposits was as follows: i) 4.69% for the first ten years ii) 5.95% for the next fifteen years iii) 8.75% for the last 5 years

i. Calculate the accumulated amount that Brandon Lim will have at the end of 30 years. (9 marks)

ii. Calculate the total interest earned by Brandon Lim for the 30 years. (3 marks)

iii. Calculate the amount of the level annuity for a 15 years period, the first beginning from the end of the 30th year that can be made from this fund that will ultimately exhaust it, assuming an interest rate of 8.55% p.a for the period. (3 marks)

(b) As people begin to age, they usually encounter more health risks. Managing pure risk entails the process of identifying, evaluating, subjugating these risks and defensive strategy to prepare for the unexpected.

Discuss the FIVE (5) strategies to address identified risk in insurance planning. (10 marks) (Total: 25 marks)