Rahim is thinking of retiring within the next 40 years. He believes that he needs at...
Rahim is thinking of retiring within the next 40 years. He believes that he needs at least RM5million in EPF to retire comfortable. He recently bought a terrace house for RM500,000 and he needs to pay mortgages every month for 25 years. Currently, he is putting a side RM4,000 every month until retirement for monthly mortgage payment and retirement. Assuming the nominal annual interest rate including the mortgate rate at 6% but compounded monthly. How much he is still short now to fullfill his ambition to retire with RM5 milion and still manage to pay this monthly mortgage payment?
Homework Answers
First we find the PV of amount required at retirement
Using financial calculator
Input: FV=5000000, N=40*12=480 , I/Y=6/12=0.5
Solve for PV as 456310.39
Present value of $4000 kept aside
Using financial calculator
Input: PMT=-4000, I/Y=0.5, N= 480
Solve for PV as 726990.34
PV of Amount short= 456310.39+500000 -726990.34 =
| 229320.05 |
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