Reference no: EM133018320
Question - Tilak is keen to apply his finance knowledge to his real-life saving goals. He is currently 22 years of age and wishes to retire from full-time work at the age of 60 with $4,000,000 in savings.
a) How much will Tilak need to contribute at the end of each month in order to receive $4,000,000 at the age of 60 at a compound interest rate of 5.10% p.a.?
b) How much will Tilak need to contribute at the start of each month in order to receive $4,000,000 at the age of 60 at a compound interest rate of 5.10% p.a.?
c) Explain why there is a difference between the two amounts determined in parts a) and b) above.
d) Calculate the effective interest rate for Tilak and explain what this number means.
e) Tilak wants to set up a college fund for his grandchild. He is aiming to be able to pass on $100,000 in 10 years' time. How much does Tilak need to set aside today into a college fund for his grandchild, assuming the fund earns 8.10% per annum?
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