Reference no: EM132954473
Time Value of Money:
You are one of two siblings, both with very different ideas of risk appetite and saving. However, you both decide to individually invest in a Pension scheme just for tax purposes. When each of you turned 20, you and your sister put a fixed amount of money into this scheme every year till the age of 60.
You are currently55 and your sister is 50. You both decide to withdraw half your money at the same time due to difficulties in meeting household expenses due to covid, and let the remaining amount sit in the pension scheme.
At the last minute however, you change your mind and withdraw the whole amount, use half, and put the remaining in a Fixed deposit for five years, at a simple interest of 6%.
Ignoring tax implications, answer the following:
Problem 1: How much money did each of you withdraw at the present time?
Problem 2: How much money will you have in savings at the end of five years?
Problem 3: Do you think you should have just kept the remaining 50% in the Pension scheme instead as originally intended?