Question

Franz is looking to save for a £4,000 deposit towards buying a canal boat in 6 years. He has £500 lump sum already and is willing to add another £30 per month.

2.3b Explain which sort of financial product would be suitable for this saving strategy

2.3c Briefly explain another way that Franz could save the amount of his deposit if he is risk-averse or doesn’t have much risk capacity.

Answer 1

1.a) Franz is saving amount = £4,000

Canal boat term period = 6 years

Franz lamp sum amount = £500

Willing to add another amount =  £30 per month.

Let find out r value = year * no of month in year

6*12

=72 months

Now calculating FV of 500 lump some with saving amount 4000

Franz lamp sum amount*(1+r)^72+ Willing to add another amount /r*(1+r)72-1).

Subtituting the above value we get

500*(1+r)^72 + 30/r*((1+r)^72-1) = 4000

we FV vaule is r =0.009141 or else we can write its as 10.97% percentage.

b) Explaning financial product would be suitable for this saving strategy.

Ans.Because Investment on assets or property is resultant to generate good equity (like share or stock in the compaines hence it will definetely suitable for saving strategy

C)Explaining another way that Franz could save the amount of his deposit if he is risk-averse or doesn’t have much risk capacity.

Ans. If the investor doesnt prefer risk it better to invest on Mutual fund which have very less risk rate but generate good month income,

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