Reference no: EM132578038

A: You are the finance manager of your company. Your company is planning for capacity expansion and need to borrow RM850,000 from a local bank. The offered term loan will be amortised in 9 years with a nomimal interest rate of 7.2% p.a. compounded monthly. The final payment will be at the end of Year 9.

1. Based on your working on an amortisation table, how much principal and interest would have your company paid after the first four months of payments?

2. If you have a choice, would you prefer to repay the above loan monthly (assume7.2% per year is compounded monthly) or annually (assume 7.2% per year is compounded annually) based on the total interest incurred? What is the main factor that contribute to such a difference in interest?

B: You wish to retire in 20 years. Currently, your pre-retirement fund has RM50,000 in a savings account yielding 3.0% annually and RM300,000 quality stocks yielding 11.0% annually. Furthermore, you expect to add RM8,000 to the savings account and RM15,000 to your stock portfolios at the end of each year in the next 20 year. You will keep this fund until the retirement date.

1. Calculate the overall rate of return per year that you must earn on your post-retirement fund if you wish to withdraw RM240,000 at the end of each year in the following 25 years after retirement.

2. How much would your remaining fund be after three year-end withdrawals of RM 300,000 each post the retirement? Assume your fund earns a return of 5% per year.