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Assume that you are an investment advisor and have recently been contacted by a client w

average of Nu.60,000 per year from his salary. He also has 3 plots of land which he is willing

Nu.210,000 for the third. The current objective of this client is to have a bank balance of Nu.

deposit money outside banks. He can pay a total of Nu.60,000 to you per year at the end of

and pay simple interest only. The yearly rate of interest is 7% for fixed deposits made up toAfter some thinking you realize that if you withdraw the money received at the maturity of

will get interest on the whole amount (principal + interest), thus enjoying the benefits of co

your first investment every year, and repeat the process of re-depositing the amounts recei

Your client also wants to avail the services of a pension fund scheme. This pension fund sch

Nu.3,050,000 is paid to the scheme on retirement at the age of 60. Your client wants to kno

money he should save annually in the bank by applying the same method mentioned above

remaining.

Advise the client and find a solution for his problems. Explain your steps in details. Also, bei

to the client that may increase his returns, also explain the risk involved in such other invest

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Yearly deposits 60,000.00

Rate of interest 7%

No. of Years 10

Final Amount 828,986.88

Total Amount Required 1,000,000.00

Remaining Amount 171,013.12

PV of Remaining amount 86,934.40

Pension Scheme

Amount paid 3,050,000.00

No. of years in retirement 25

Annual Pension 250,000.00

Effective rate 6.50%

Years to retirement 30

Yearly Savings at 7% p.a. 32,288.53

For Bank Balance of Nu.1,000,000:

Deposit an amount of Nu. 60,000 in the first year for a one year period. On maturity, withdra

account sie by side in the next year and then repeat the same process with the same amount

Advise: Sell the first plot of land for Nu.90,000 and deposit Nu.86,934 in bank (the leftover a

and keep redepositing the amount at maturity year on year to get the benefit of compoundin

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