You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years. a) Explain the time value of money principle b) Identify the underlying assumption of the time value of money principle c) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.
You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.
a) Explain the time value of money principle
b) Identify the underlying assumption of the time value of money principle
c) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.
d) Suggest how you can minimize the amount of cash you must invest in order to reach your retirement goal.
e) Compute the amount you will have at the end of the 45 years.
f) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.
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