Lux Investing
Ang, bakar and chandran are friends and they have just graduated from a local university.?
Ang works with a starting pay of RM 2000 per month. Bakar is a sales executive whose income depends solely on the comission he receives. He earns a comissions of RM 1000 for the first month and his comissins increases by RM 100 for each subsequent month. On the other hand, Chandran decides to go into business. He opens a cafe and makes a profit of RM 100 in the first month. For the first year, his profit in each subsequent month is 50% more than that of the previous month. In the second year, Ang receives a 10% increment in his monthly pay. On the other hand, the commission received by Bakar is reduced by RM 50 for each subsequent month. In addition, the profit made by Chandran is reduced by 10% for each subsequent month. (i) fond the total amount each of them will reci=eive after three years. (ii) compare and comment on the differencs in the interest received. If you were to invest RM 10 000 for the same period time, which fixed deposit account would you prefer? give your reasons?
Public Comments
- What is with this question - been posted 4 times! Here's one: http://answers.yahoo.com/question/index;_ylt=AqDwwD4JKlWdb9s9MgKmWfjsy6IX?qid=20070820071447AAdjg0S&show=7#profile-info-pdppFYKAaa This is the answer after 2 years - and not compared to an investment of 10000 - you would have to know the interest rate. I'd take Chandran any day! Compound interest baby! (A) Set up columns in a spreadsheet and use the following formulae: Man A: 2000 each month for 12 months Man B: 1000 the first month then 100+previous month (1000, 1100, 1200, 1300...) Man C: 100 the first month then 1.5 multiplied by the previous month (month 1: 100, month 2: 1.5*100 = 150, month 3: 1.5*150 = 225...) Sum up each column. You will see that Chandran has the most at the end of the first year (magic of compound interest) (B) now add columns for the second year. Man A gets a raise and will have 2200 each month - sum them over 12 months Man B - begin with the last month of the previous year (should get 2100) and now only add 50 per month - month 13: 2150, month 14: 2200.... Man C: Now here is where I get confused, does it get reduced only 10% for the second year OR is is 40% increase in month 13, 30% increase in the month 14, 20% in month 15, 10% in month 16 and then steady in months 17-24? If it is the first one, you will take the ending value at month 12 and multiply it (and each of the following months) by 1.4. If the percentage continues to decrease, month 13 will be month 12 * 1.4, month 14 will be month 13*1.3, month 15 will be month 14 * 1.2... Either way, it will be a lot of money, compared (40% increase in profit every month will have a total at the end of year 2 over 1.6M). I hope this makes sense. My Answers - I'm sure you'll have to show your work: Man A: Year 1 total: 24,000 Year 2 total: 26,400 Man B: Year 1 total: 18,600 Year 2 total: 29,100 Man C: Year 1 total: 25,750 Year 2 total (depends on what the question means): with 40% profit every month: 1.646 M with declining profit every month until each month is the same amount of profit: 233,765
