Question

You have just started a new job and your employer has enrolled you in KiwiSaver.

This is the first time you have been enrolled in KiwiSaver and you decide not to “opt out”.

You are interested in estimating how much your KiwiSaver fund could be worth when you retire.

You make the following assumptions:

• You have just turned 30 and will retire in exactly 35 years when you are 65.

• Your salary is $50,000 this year and you expect this to increase by 3% every year.

• You can choose to contribute either 3% or 8% of your salary into your KiwiSaver fund each year. https://www.kiwisaver.govt.nz/already/contributions/you/amount/

• Your employer must contribute 3% of your pay into your KiwiSaver fund each year. https://www.kiwisaver.govt.nz/already/contributions/employers/ You can ignore any tax implications and assume your account receives the full 3%. (KIWI SAVER ACC)

• You will be entitled to the annual member tax credit of $521.43 which will be credited into your KiwiSaver fund at the end of every year. https://www.kiwisaver.govt.nz/new/benefits/mtc/

• Your KiwiSaver fund will invest in a diversified portfolio of assets to earn a return on your investment. Of course, there is uncertainty around the actual annual rate of return that your fund will earn over the 35 years but you decide that 6% and 12% represent a good range of potential rates of return to conduct your analysis on.

• Regardless of the return earned, the manager of your KiwiSaver fund will charge a management fee of 1.0% at the end of each year, based on the opening balance of your fund each year.

• You will make no withdrawals or additional contributions (other than those mentioned above) to your fund until you retire in 35 years.

• For simplicity, assume that all contributions to your KiwiSaver fund are made once per year, at the end of the year. The first lot of contributions will be made in one year from today.

Construct a spreadsheet that will allow you to answer the following questions on Canvas.

You and three friends have decided to jointly purchase a property to live in (it has four separate bedrooms and a communal bathroom, kitchen and living area). Your portion of the purchase price is $120,000. You have some money saved in your KiwiSaver account (see TASK 1) which you are able to withdraw to help finance the house purchase but you will still need to borrow $100,000.

Your local bank is willing to lend you $100,000 for a period of 10 years at an interest rate of 5%p.a. The loan must be repaid, over the 10-year period, by equal monthly instalments. The first payment will occur exactly one month after you borrow the money.

Construct a spreadsheet that will allow you to answer the following questions on Canvas.

What is the amount of each monthly instalment?

$1,060.66

$694.44

$416.67

$1,111,11

$1,000.00

$666.66

Answer 1

Loan value	100000
No. of years	10	yr
No. of months	120
RoI	5%
Monthly interest	0.42%
Per month amortization	$1,060.66	PMT(5%/12,120,100000,,)