QUESTION 3 Mr Wire, an avid sports fan, wishes to attend the 2028 Summer Olympics in Los Angeles in five (5) years time as he will be retiring from work a few months before the event is held. His travel agent, who also specialises in putting together packages for clients to attend major sporting events across the world, has estimated that despite the current price of a flight to Los Angeles being R25 000, rising oil prices and inflationary pressures will more than likely lead to an increase in the price of the tickets at 6,5% per annum for the next two years and thereafter at 8,25% per annum thereafter until the Olympics is held. Together with the price of the tickets, the agent has estimated that the cost of tickets to the sporting events, hotel accomodation and other travel expenses are likely to amount to nine thousand US dollars ($9 000). Mr Wire contacted his financial planner, Mr Sprint, who indicated that he should work on an expected range rate of around R22,50 to the US dollar in 2028. After going through Mr Wire's projected finances and possible investment options, Mr Sprint, has advised him on the following investment plan in order for Mr Wire to be able to attend the Olympics. 1) 2) Invest R80 000 in a fixed deposit today which offers interest at a rate of 12% per annum, payable every 6 months for 5 years. Mr Wire will re-invest the interest. To make up the shortfall by investing monthly in an annuity from year 3 onwards. The annuity is projected to offer an interest rate of 16% per annum compounded monthly. REQUIRED: Calculate the monthly annuity payments that Mr Wire will need to make for the shortfall. Round all Rand calculations to the nearest whole number and all percentages to two (2) decimal places.
QUESTION 3 Mr Wire, an avid sports fan, wishes to attend the 2028 Summer Olympics in Los Angeles in five (5) years time as he will be retiring from work a few months before the event is held. His travel agent, who also specialises in putting together packages for clients to attend major sporting events across the world, has estimated that despite the current price of a flight to Los Angeles being R25 000, rising oil prices and inflationary pressures will more than likely lead to an increase in the price of the tickets at 6,5% per annum for the next two years and thereafter at 8,25% per annum thereafter until the Olympics is held. Together with the price of the tickets, the agent has estimated that the cost of tickets to the sporting events, hotel accomodation and other travel expenses are likely to amount to nine thousand US dollars ($9 000). Mr Wire contacted his financial planner, Mr Sprint, who indicated that he should work on an expected range rate of around R22,50 to the US dollar in 2028. After going through Mr Wire's projected finances and possible investment options, Mr Sprint, has advised him on the following investment plan in order for Mr Wire to be able to attend the Olympics. 1) 2) Invest R80 000 in a fixed deposit today which offers interest at a rate of 12% per annum, payable every 6 months for 5 years. Mr Wire will re-invest the interest. To make up the shortfall by investing monthly in an annuity from year 3 onwards. The annuity is projected to offer an interest rate of 16% per annum compounded monthly. REQUIRED: Calculate the monthly annuity payments that Mr Wire will need to make for the shortfall. Round all Rand calculations to the nearest whole number and all percentages to two (2) decimal places.
Chapter16: Country Risk Analysis
Section: Chapter Questions
Problem 29QA
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Transcribed Image Text:QUESTION 3
Mr Wire, an avid sports fan, wishes to attend the 2028 Summer Olympics in Los Angeles in five (5)
years time as he will be retiring from work a few months before the event is held.
His travel agent, who also specialises in putting together packages for clients to attend major
sporting events across the world, has estimated that despite the current price of a flight to Los
Angeles being R25 000, rising oil prices and inflationary pressures will more than likely lead to an
increase in the price of the tickets at 6,5% per annum for the next two years and thereafter at 8,25%
per annum thereafter until the Olympics is held.
Together with the price of the tickets, the agent has estimated that the cost of tickets to the sporting
events, hotel accomodation and other travel expenses are likely to amount to nine thousand US
dollars ($9 000). Mr Wire contacted his financial planner, Mr Sprint, who indicated that he should
work on an expected range rate of around R22,50 to the US dollar in 2028.
After going through Mr Wire's projected finances and possible investment options, Mr Sprint, has
advised him on the following investment plan in order for Mr Wire to be able to attend the
Olympics.
1)
2)
Invest R80 000 in a fixed deposit today which offers interest at a rate of 12% per annum,
payable every 6 months for 5 years. Mr Wire will re-invest the interest.
To make up the shortfall by investing monthly in an annuity from year 3 onwards. The
annuity is projected to offer an interest rate of 16% per annum compounded monthly.
REQUIRED:
Calculate the monthly annuity payments that Mr Wire will need to make for the shortfall.
Round all Rand calculations to the nearest whole number and all percentages to two (2) decimal
places.
||
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