Reference no: EM131587450

Question: Planning: The Key to Wealth

Abdol Akhim has just come from a Personal Finance class where he learned that he can determine how much his savings will be worth in the future. abdol is completing his two-year business degree this semester and has been repairing computers in his spare time to pay for his tuition and books. Abdol got out his savings records and decided to apply what he had learned. He has a balance of $1000 in a money market account at First Savings BAnk, and he considers this to be an emergency fund. His instructor says that he should have 3-6 months of his total bills in an emergency fund. His bills are currently $750 a month. He also has a checking acount and a regular savings account at First Savings Bank, and he will shift some of hius funds from those accounts into the emergency fund. One of Abdol's future goals is to buy a house. He wants to start another account to save the $8000 he needs for a down payment.

- How much money will Abdol receive on $1000 in a 365-day year if he keeps it in the money market account earning 2.25% compounded daily?

- How much money must Abdol shift from his other accounts to his emergency fund to have four times his monthly bills in the account by the end of the year?

Abdol realizes he needs to earn more interest than his current money market can provide. Using annual compounding on an account that pays 5.5% interest annualy, find the amount Abdol needs to invest to have the $8000 for his house in 5 years?