Siti is a recent graduate from Faculty of Engineering UM with a first class honor hence her
Question:
Siti is a recent graduate from Faculty of Engineering UM with a first class honor hence her parents decided to gift her with a lump sum of RM5,000 cash. Siti decided to invest the money in a unit trust with annual dividend of 6%. Immediately after graduation, Siti was hired as ‘Design Engineer’ at a multinational company with a salary of RM3,500 monthly. 60% of the salary is used for her daily expenses such as rental, utilities, transportation, entertainment, etc. The balance of her salary is invested in the unit trust. Siti is planning her finances to make the following purchases:
a) To buy a car that costs RM40,000 one year after she started working. The current market requires her to pay 10% of the car and put the remaining balance in a loan with interest rate of 1.9% compounded annually for 7 years. The deposit will be taken from her saving in the unit trust.
b) To buy an apartment 3 years after she started working that costs RM200,000. Deposit is not required but Siti still needs RM10,000 from her saving to furnish the unit.
1) Define the cash-flow diagram for Siti’s financial situation and plans.
2) What is Siti’s monthly payment for her car? How much does this impact her monthly saving in the unit trust towards her goal to buy the condominium?
3) For her apartment purchase, Siti is considering the duration of the loan should not be more than 30 years and still have some monthly saving for rainy days. What is the interest rate that bank should offer for Siti to achieve this?
4) Revise the cash-flow diagram until year 7. Do you think Siti’s plan is feasible? Justify your answer and give some suggestions.
Financial Accounting Information For Decisions
ISBN: 978-0324672701
6th Edition
Authors: Robert w Ingram, Thomas L Albright