Reference no: EM132776201

Question - Ms. Scarlet Jo has surplus cash of RM20,000 and is looking at three investment options.

Option 1: Invest in a savings account that compounds interest quarterly at a rate of 4% p.a. for a 4 year period.

Option 2: Investing RM5,000 into a fund at the end of each year for 4 years. The fund pays a 6% interest rate on a yearly basis.

Option 3: Invest in a savings account which pays simple interest at the rate of 8% p.a. for a 4 year period.

Required -

(a) For each option, calculate the amount Ms. Scarlet Jo would have at the end of the fourth year.

(b) Based on the results calculated in (a), advice Ms. Scarlet Jo which option to choose.

(c) If Ms. Scarlet Jo needs RM100,000 10 years from now for his daughter's education, how much does he have to put into the bank now, if the bank on an average is paying 5% interest rate and interest is compounded half yearly.