Question

accumulate RO 10,000 for this brother in std 7 and to accumulate RO 12,000 for this brother in std 5 .

He has come up with two proposals.

Proposal A- Invest in Shares of company

The investment in share will be earning a return of 8%. The amount of investment will be at the end of

2 Abdullah AL Hashmi has two brothers studying in the school in standard 5

send to UK for getting Masters. As there is increasing inflation in the economy every year Mr Abdullah is planning to make some smart investment of funds so that after 10 years from now he should be able to

every year. The investment will be sold at the end of 10th year.

and 7

.He is planning to

th

4

Proposal – B Invest in Bonds issued by some company

This investment will be made at the end of each year in the Bonds issued by company in Oman. The

investment in Bonds will be fetching a return of 6%. The investment will be sold at the end of 10th year.

You are required to calculate for the above two proposal

a) The investment to be made in each year for Proposal A and

b) The investment to be made in each year for Proposal B

* using MS Excel.

Q1. Abdullah AL Hashmi has two brothers studying in the school in standard 5th and 7th .He is planning to send to UK for getting Masters. As there is increasing inflation in the economy every year Mr Abdullah is planning to make some smart investment of funds so that after 10 years from now he should be able to accumulate RO 10,000 for this brother in std 7th and to accumulate RO 12,000 for this brother in std 5th. He has come up with two proposals.

Proposal A- Invest in Shares of company The investment in share will be earning a return of 8%. The amount of investment will be at the end of every year. The investment will be sold at the end of 10th year.

Proposal – B Invest in Bonds issued by some company This investment will be made at the end of each year in the Bonds issued by company in Oman. The investment in Bonds will be fetching a return of 6%. The investment will be sold at the end of 10th year.

*You are required to calculate for the above two proposal

a) The investment to be made in each year for Proposal A ?

b) The investment to be made in each year for Proposal B ?

* using MS Excel.

Answer 1

Proposal A

Total accumulation in the fund, ie Future value (FVOA)of the investment should be 10000+12000=22000

at the interest rate of r=8% or.0.08

for a period of n= 10

we need to find the annual investment, Pmt.--- ??

using the formula for Future value of ordinary year-end annuity

ie.FVOA= Pmt.*((1+r)^n-1)/r

Plugging -in the above values.

ie.22000= Pmt.*((1+0.08)^10-1)/0.08

Pmt.=22000/(((1+0.08)^10-1)/0.08)=

1518.65

So,

a) The investment to be made in each year for Proposal A = $ 1518.65

Proposal B

Total accumulation in the fund, ie Future value (FVOA)of the investment should be 10000+12000=22000

at the interest rate of r=6% or 0.06

for a period of n= 10

we need to find the annual investment, Pmt.--- ??

using the formula for Future value of ordinary year-end annuity

ie.FVOA= Pmt.*((1+r)^n-1)/r

Plugging -in the above values.

ie.22000= Pmt.*((1+0.06)^10-1)/0.06

Pmt.=22000/(((1+0.06)^10-1)/0.06)=

1669.10

So,

b) The investment to be made in each year for Proposal B = $ 1669.10