Question

196 Financial Management for Beginners Question 2 Sonata has won a lottery worth RM30,000. She wishes to purchase an orth RM30,000. She wishes to purchase an annuity that would provide her with a steady income over the next 15 years. Currently, the local banks over the next 15 years. Currently, the local banks and financial institutions are paying 8% compound interest on an annual basis. If she were to deposit heron erest on an annual basis. If she were to deposit her funds, what year-end equal dollar amount would she be able to withdraw annually that she would have a zero ad withdrawal 15 years from now? Question 3 You are planning to retire in 10 years' time and buy a condominium at the Cherating seaside. Presently, the condominium costs RM200,000 and is expected to increase in value each year at the rate of 790. Suppose you can earn 12% 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 condominium when you retire?

Answer 1

Answer to Q#2 (First question in the list): Annual Interest rate, RATE 8% #of year-end withdrawals, NPER 15 Amount deposited today, PV RM 30,000 Balance in account at the end, FV RM 0 [Because all will be withdrawn over 15 years] 0 0 if withdrawn at the end of each year; 1 if withdrawn at the beginning of each year Annual withdrawal type, TYPE Annual withdrawal possible RM 3,504.89 [Ref: NOTE] NOTE: Annual withdrawal possible is calculated using EXCEL FUNCTION PMT(rate,nper,pv,fv,type) where rate-8%; nper-15; pv =30000; fv-0; type-0; Here, fv is negative as it denotes cash inflow; type-0 as annual withdrawal is made at the end of each year only A В C 1 Annual Interest rate, RATE 8% 2 #of year-end withdrawals, NPER 3 Amount deposited today, PV 4 Balance in account at the end, FV 5 Annual withd rawal type, TYPE 6 Annual withdrawal possible 15 RM 30,000 RM 0 [Because all will be paid off over loan's tenure] 0=0 if occurs at the end of each month; 1 if occurs at the beginning of each month =PMT(B1,B2,-B3,B4,B5) -->(a) [Ref: NOTE]