The future value of money is not the same as today dollars. And the same is true
Question:
The future value of money is not the same as today dollars. And the same is true about money from the past. This phenomenon is known as the time value of money (TVM). Using the TVM concept, calculate and find the correct answer for the following questions.
a)
Shahril aims to start his bakery business in 5 years’ time after graduating from Universiti Malaysia Kelantan. Currently he is at the end of his first-year study of a 3-year bachelor’s degree program. He plans to invest his money by depositing into a unit trust fund at the end of every year. What is the amount that he needs to deposit annually if he needs to accumulate RM50,000 in order to start the business? Assume that the account will earn an annual rate of 12%. Round off to the nearest RM1.
b)
Putra wants to retire in 30 years, and he wants to have an annuity income of RM50,000 a year for 25 years after retirement. Putra wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of 9%, how much must Putra invest today in order to have his retirement annuity (round to the nearest RM100)?
c)
You have borrowed RM250,000 to buy a Toyota Vellfire car. You plan to make monthly payments over a 9-year period. Since the car is a reconditioned unit, the bank will charge you 2 percent higher than a standard rate of 3 percent. Calculate the total amount of dollars you will pay the bank over the life of the loan. Round to the nearest dollar and assume beginning-of-month payments.
Managerial Accounting
ISBN: 978-0077826482
3rd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips