Reference no: EM133120078

After graduating from JCU at the age of 23, Esther has been working in a local accounting company as an auditor for 3 years. Esther earns $5,000 per month since 3 years ago till now. Her expenses are approximately 30 percent of her salary. She also saves $500 monthly for emergency need. Esther keeps her monthly savings in the bank at the interest rate of 1% p.a. and compounds monthly. Assume interest rate remains unchanged. However, Esther is now considering to invest her savings to fund for the down payment for her condominium. She feels that based on the increasing price of property in Singapore, she will probably need $300,000 down payment in 10 years to pay for her condominium cost $1,500,000. Assuming Esther's salary remained constant throughout 10 years from now.

a) Based on the performance of Russell 1000 index over last ten years, Esther expects an average rate of return of 15% p.a. on her investment. If she decides to invest all her disposal income she has accumulated in last 3 years, how much will she get in 10 years? Assume daily compounding at 365 days a year.

b) According to part (a), will Esther have $300,000 she needs in 10 years? If not, how much surplus or deficit she has in her fund today?

c) If Esther decides to invest all her monthly disposal income, what expected rate of return Esther should seek to accumulate $300,000 in 10 years? How long will it take Esther to achieve her fund if she invests in Russell 1000 index fund? Assume daily compounding at 365 days a year.

d) You believe Esther should seek for professional advice for her financial planning. What alternatives you will advise her to achieve her financial goal in 10 years realistically? Discuss.