Reference no: EM132894113

Over the past several years, Mr Lee has been able to save regularly. As a result, today he has $14,188 savings. He wants to establish her retirement fund in 5 years and feels he will need $50,000 to do so.

Problem a. If he can earn 12% p.a. on his money, how much will his $14,188 savings be worth in 5 years? Will Mr Lee have $50,000 he needs? If not, how much more money will he need?

Problem b. Given your answer to (a), how much will Mr Lee have to save each year over the next 5 years to accumulate the additional money, assuming he can earn interest rate at 12% p.a.?

Problem c. If Mr Lee can afford to save only $2,000 a year, given your answer to (b), will he have $50,000 he needs to establish his retirement fund in 5 years? What expected return Mr Lee should seek to grow his savings of $14,188 to $50,000 in 5 years? If he invests in an investment with 12% return per annum, how long should Mr Lee plan ahead for his savings to achieve his retirement fund?

Problem d. As a portfolio manager, what possible advice you could suggest Mr Lee to consider to achieve his goal in terms of the time value of money factors/considerations.