After the collapse of a Savings and Loans Company, depositors who were able to recover funds lodged with the company are seeking alternative avenues of investment. You have been called upon to advise the following clients on investment decisions they have to make.
a) Kwabena was able to recover GH¢150,000 out of GH¢200,000 invested in the Savings and Loans Company. How much money should he invest at a return of 6% per annum so as to earn an annual income of GH¢15,000 for a period of 10 years? (10 marks)

b) Kasuli, a Marketing Executive who could not recover any amount out of his investment decided to take a mortgage at an interest rate of 15% over a 20 year term. If his income is enough to enable him to pay GH¢1,400 per month, what is the maximum amount he can borrow?                                                                                                                                    (10 marks)

Kofy Addo decided to start saving money for his future. At the end of each month he deposited GH¢500 into an account at Trust Bank, which earned an interest rate of 9% per annum compounded monthly.
Required:
i) Determine the balance of Kofy Addo’s account after 20 years.                                                                                     (4 marks)

ii) Calculate the amount deposited into the account over the 20 year period.                                                                   (2 marks)

iii) Calculate how much interest he earned over the 20 year period.                                                                                 (2 marks)

iv) Calculate the effective annual rate of interest.                                                                                                              (2 marks)

a) One of the most important application of annuities is the repayment of interest- bearing debts. These debts can be paid by making periodic deposits into a sinking fund which is used as a future date to pay the principal of the debt or by making periodic payments that cover the outstanding interest and the principle. This second method is called amortization.
(i) Explain the term annuities as used in the statement above.                                                                                            (2 marks)

(ii) What is a sinking fund?                                                                                                                                                 (2 marks)

(iii) When is a loan with a fixed rate of interest said to be amortized ?                                                                               (1 mark)

c) Maame TorTor borrows GH¢ 3000.00 and agrees to pay interest quarterly at an annual rate of 8%. At the same time, she set up a sinking fund in order to repay the loan at the end of 5 years. If sinking fund earns interest at the rate of 6% compounded semi-annually,
Required:
Determine the size of each semi-annual sinking fund deposit.                                                                                           (5 marks)