MARA PROFESSIONAL COLLEGE BANDAR PENAWAR

DIPLOMA IN ACCOUNTANCY
FINANCIAL MANAGEMENT
FIN 3513
SESSION 3/ 2021-2022
ASSIGNMENT 2 (10%)

Instructions:

1. This is a group assignment (4-5 members in a group).

2. Marks will be given based on the accurate solutions for all the questions as well as the
demonstration of clear understanding towards the matters/ideas delivered in the
report.
3. Submission date is on the 13th January 2022, before 12.30pm.
4. All answer must be type written (“Font-Tahoma; Font Size-11; Justified, 1.5 Spacing”).
5. Plagiarism is strictly prohibited and will result to stiff penalty.

Good Luck & All the Best

 PART A - 50 MARKS

Question 1 (10 marks)

Congratulations! You just won the e-Sports! After pinching yourself to ensure you were not
dreaming, you receive a phone call from the e-games organizer.

"Congratulations Hero! We are so happy for you, it must be the best day of your life. We have
a few options for you regarding how you wish to get paid your winnings. We won't charge
you any fees no matter which option you choose, so just let us know what is best for you."

You are given the following options:

Option 1: Receive RM 500,000 today.
Option 2: Receive 10 payments of RM 50,000 over the next 10 years (the first payment
will be at the end of this year).
Option 3: Receive RM 50,000 today and 10 payments of RM 45,000 over the next 10
years (the first payment will be at the end of this year).

You consider yourself so lucky to have won and even luckier to have taken a lesson on the
time value of money. This will help you make the best possible decision. You remember that
your savings account pays an interest rate of 5% annually.

Required:
a) Determine which option is the best for you. Show the details computation to justify your
best decision.
b) Suppose you took Option 1 and invested the money in a savings account paying 4%
annually for 5 years. What is the future value?

Question 2 (6 marks)

Izzah’s employer offer its workers an optional two-month unpaid vacation after 7 years of
service to the firm. Izzah, who just started working for the firm plans to spend her vacation
touring Malaysia at an estimated cost of RM 30,000. To finance her trip, Izzah plans to make
an annual deposit of RM 2,000 into a savings account at the end of each of the next seven
years (the first deposit will occur one year from today). The account pays 9% annual interest.

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Required:
a) Determine the amount of Izzah’s account balance in seven years. Will it be enough to
pay for her trip?
b) Suppose Izzah’s increases her annual deposit to RM 4,000, how large her account
balance be in seven years?

Question 3 (4 marks)

Umaira purchased her dream car for RM 170,000. She paid RM 17,000 upront and agreed to
pay the rest over the next 7 years in 7 equal annual payments which include principal
payments plus 5% compound interest on the unpaid balance. Determine the amount of the
equal payments.

Question 4 (4 marks)

Suppose your father has just retired and has a retirement nest egg currently worth RM
1,000,000. If he plans to take out RM 101,853 at the end of each of the next 20 years
beginning one year from today so that his nest egg is worth nothing after making the 20 th
withdrawal, what interest rate must his nest egg earn?

Question 5 (3 marks)

EZ Berhad bought a piece of land in 2001 for RM 200,000. By 2021, its value had increased
to RM 1,120,000. Find the annual rate of appreciation during this period.

Question 6 (5 marks)

You want to buy an apartment for RM 250,000 cash. The owner allow you to pay for it in six
annual instalments of RM 45,000 each, the first one right now. Which method is cheaper for
you if the time value of money is 12%?

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Question 7 (7 marks)

Aliff has the following options in receiving a mixed stream of cash flows from an investment
over the next five years:
Cash Flow Stream
End of year Option A (RM) Option B (RM)
1 50,000 10,000
2 40,000 20,000
3 30,000 30,000
4 20,000 40,000
5 10,000 50,000
TOTAL 150,000 150,000

Required:
a) Find the present value of each stream, using a 15 percent discount rate.
b) Compare the calculated present values and suggest the best option for Aliff. Justify your
recommendation.

Question 8 (4 marks)

B-Luxurious Sdn. Bhd. has decided to put RM 30,000 per quarter in a pension fund. The fund
will earn interest at the rate of 6% per year compounded quarterly. Find the amount available
in this fund after 10 years.

Question 9 (4 marks)

You have need to accumulate RM 25,000 in 10 years. How much will you have to invest right
now if your rate of return is 6% compounded semi-annually?

Question 10 (3 marks)

What is the present value of a perpetuity which will pay RM 1,000 per year beginning one
year from now if the appropriate interest rate is 7%?

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 PART B - 50 MARKS

(Case study – Dr. Hanna)

Things to note:

1) Analyse Dr. Hanna’s profile – demographics, psychographics etc. (use the information
in decision making process).
2) Suggestions on 2 financial institutions as a source of financing for Dr. Hanna’s dream
house (refer the houses’ advertisements).
3) Recommendation on the best house and financing option after thorough consideration.
Write a full report about the idea. Please ensure to attach an amortization schedule in
Excel to show periodic payments on an amortizing loan in your report (present details
calculation for both bank options).

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