Reference no: EM133035139

Question - Anita is living at home with her mother. But Anita has now found a job and is planning to move into her own flat. She wants to buy a flat four years from now, knowing that she will need a deposit of at least £9,000 in order to do so. Anita has £1,500 in a savings account.

1. If Anita uses all of her savings and saves £110 per month, what rate of return will Anita need to reach her target of £9,000 after four years?

2. Anita has seen that shares (equities) in a particular internet start-up company have given an 18 per cent return over the past two years. She is considering using all of her savings into buying this company's shares. Give two reasons why putting all her savings into this one company's shares might not generate anything close to the 18% return they've achieved over the past two years.

3. Explain another way that Anita could save the amount of her deposit if she is risk-averse or doesn't have much risk capacity.

4. How will Anita's efforts to save for a deposit be affected if there is a fall in interest rates which causes a rise in house prices?