Mr. Hammad is a salaried person and thinking to save for the education of his daughter. In this concern he is considering two diverse saving plans for ten years.
First plan requires a deposit of Rs 5,000 every six months with annual interest rate of 6.5 percent, compounded semiannually.
However, under the second plan, he has to deposit Rs 10,000 every year with Interest rate of 7.5 percent compounded annually.
Keeping in view the given situation, you are required to answer the following
questions:
a). What will be the future value of first plan at the end of 10 years?
b). What will be the future value of the second plan at the end of 10 years?
c). You are required to analyze that which plan would be suitable for him while
keeping in view his major concern: 'The value of plan at the end of 10th year'.
d). What would be the change in your decision if the interest rate on second plan is also 6.5 percent?
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