Task 1
You have just started a new job and your employer has enrolledyou in ANZ savings fund scheme.
This is the first time you have been enrolled in the savingsfund scheme of ANZ and you decide not to “opt out”.
You are interested in estimating how much your savings fundcould be worth when you retire.
You make the following assumptions:
• You have just turned 30 and will retire in exactly 35 yearswhen you are 65.
• Your salary is $50,000 this year and you expect this toincrease by 3% every year.
• You can choose to contribute either 3% or 8% of your salaryinto your savings fund each year.
• Your employer must contribute 3% of your pay into yoursavings fund each year. You can ignore any tax implications andassume your account receives the full 3%.
• You will be entitled to the annual member tax credit of$521.43 which will be credited into your savings fund at the end ofevery year.
• Your savings fund will invest in a diversified portfolio ofassets to earn a return on your investment. Of course, there isuncertainty around the actual annual rate of return that your fundwill earn over the 35 years but you decide that 6% and 12%represent a good range of potential rates of return to conduct youranalysis on.
• Regardless of the return earned, the manager of your savingsfund 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 in35 years.
• For simplicity, assume that all contributions to yoursavings fund are made once per year, at the end of the year. Thefirst lot of contributions will be made in one year fromtoday.
Construct a spreadsheet that will allow you to answer thefollowing questions.
1. What will be your expected annual salary when you are 45years old?
2. How much will be in your savings fund account at the startof that year if you contributed 3% of your salary and the fundearned 6%p.a.?
3. How much will be in your savings fund account when youretire if you contributed 3% of your salary and the fund earned6%p.a.?
4. How much will be in your savings fund account when youretire if you contributed 8% of your salary and the fund earned12%p.a.?
Task 2
You and three friends have decided to jointly purchase aproperty to live in (it has four
separate bedrooms and a communal bathroom, kitchen and livingarea). Your portion of
the purchase price is $120,000. You have some money saved inyour ANZ savings fund account scheme (see TASK 1) which you areable to withdraw to help finance the house purchase but you willstill need to borrow $100,000.
Your local bank is willing to lend you $100,000 for a periodof 10 years at an interest
rate of 5%p.a. The loan must be repaid, over the 10-yearperiod, by equal monthly
instalments. The first payment will occur exactly one monthafter you borrow the money.
Construct a spreadsheet that will allow you to answer thefollowing questions.
5. What is the amount of each monthly instalment?
6. How much interest will you pay in the 24th month of theloan?
7. What will be the balance outstanding on the loan after fiveyears?
8. How much interest will you have paid in total over the lifeof the loan?
Task 2
You and three friends have decided to jointly purchase aproperty to live in (it has four
separate bedrooms and a communal bathroom, kitchen and livingarea). Your portion of
the purchase price is $120,000. You have some money saved inyour ANZ savings fund account scheme (see TASK 1) which you areable to withdraw to help finance the house purchase but you willstill need to borrow $100,000.
Your local bank is willing to lend you $100,000 for a periodof 10 years at an interest
rate of 5%p.a. The loan must be repaid, over the 10-yearperiod, by equal monthly
instalments. The first payment will occur exactly one monthafter you borrow the money.
Construct a spreadsheet that will allow you to answer thefollowing questions.
5. What is the amount of each monthly instalment?
6. How much interest will you pay in the 24th month of theloan?
7. What will be the balance outstanding on the loan after fiveyears?
8. How much interest will you have paid in total over the lifeof the loan?
