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ASSIGNMENT QUESTIONS

1. Jessica deposits RM15,000 at the start of every year into her CIMB bank account. The
interest paid by the bank is 3% annually. Any interest she received is kept in the bank.
Compute the total savings at the end of each year for 5 years. (You may construct a table
to present the values).
[10m]

ANNUITY DUE

Annuity payment per period (PMT) RM 15,000


Annual interest rate (r) 3%
Time in years (T) 5 years
Number of compounding period per years (k) 1
Interest rate per compounding period (i) 3% / 0.03
Total number of compounding period (n) 5

r 3
= =3 =0.03
i k 1

n=k ( T ) =1 ( 5 ) =5

A=PMT [ i ]
( 1+ i )n 1
(1+i)
1st years
A=15,000 [ ( 1+0.03 )11
0.03 ] (1+ 0.03 )

=15,000 x 1 x 1.03
=RM15,450

[ ]
nd
2 years ( 1+0.03 )21
A=15,000 (1+ 0.03 )
0.03

=15,000 x 2.03 x 1.03


=RM31,363.50
3rd years
A=15,000 [
( 1+0.03 )31
0.03 ]
( 1+ 0.03 )

=15,000 x 3.0909 x 1.03


=RM47,754.41

[ ]
th
4 years ( 1+0.03 )41
A=15,000 ( 1+0.03 )
0.03

=15,000 x 4.1836 x 1.03


=RM64,637.04
5th years
A=15,000 [
( 1+0.03 )51
0.03 ]
( 1+ 0.03 )

=15,000 x 5.3091 x 1.03


=RM82,026.15
2. Administrators of a university are debating the construction of a new building in
addition to the Faculty of Business Administration. They have estimated the total amount
needed at the time of construction in 5 years to be RM21,300,000. The University already
has RM10,500,000 in a bank, earning 6 % per year. Compute

I. the future value of the amount in the bank in 5 years.


[6m]
II. the shortage in 5 years.
[2m]
III. the interest earned in part (I).
[2m]

FUTURE VALUE AND THE COMPOUND INTEREST

Principal (initial investment) / P RM 10,500,000


Annual interest rate / r 1
6 2 %

Time in years / T 5 years


No. of compounding period per year / k 1
Interest rate per compounding period / i 6.5% / 0.065
Total number of compounding periods / n 5
Maturity value / M RM 14,385,909.97
Interest / I RM 3,885,909.97

1
6
i r = 2 =6.5 =0.065
k 1

n=k ( T ) =1 ( 5 ) =5
I.
the future value of the amount in the bank in 5 years.

Formula Applied : FV = M = P ( 1 + i )n
Equation Information : (i) = 6.5 % , P = RM 10,500,000 , n = 5

Solution :
= 10,500,000 ( 1 + 0.065)5
= RM 14,385,909.97

II.
the shortage in 5 years.
Solution :
RM 21,300,000 RM 14,385,909,97
= RM 6,914,090.03

III.
the interest earned in part (I).

Formula Applied : M = P + I

Solution: I = M P

= RM 14,385,909.97 RM 10,500,000
= RM 3,885,909.97
3. Create an invoice for 8 items which are related to a company. Compute the total
invoice amount that have been created if the trade discount is 10/15, cash discount is
15/10, 8/20, n/60 and the invoice was paid on the 18th day of the invoice date. Include the
shipping and insurance amount of RM 15 into the invoice. More marks will be given for
creativity of the invoice.