question archive Mr Ahmet, who won a prize of 1 million USD by participating in a quiz show, will provide a significant return if he uses it in repo, time deposit and bonds
Mr Ahmet, who won a prize of 1 million USD by participating in a quiz show, will provide a significant return if he uses it in repo, time deposit and bonds
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Mr Ahmet, who won a prize of 1 million USD by participating in a quiz show, will provide a significant return if he uses it in repo, time deposit and bonds. However, careful decisions need to be made as to which area to invest. If the money is deposited in the bank, the bank pays interest once a month and pays 16% interest. Mr. Ahmet wants to buy 2 houses, one worth 900000 USD and the other 500000 USD, in the future, by investing this money in the bank. Accordingly, after how long is it possible for Ahmet Bey to buy these two houses with the money and income he cared? If you were Mr. Ahmet, how would you advise him to use this money?
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Interest rate per month = 16%/12 =0.013333
Let n be the number of months after which Mr Ahmet is able to buy the houses
Then , Future value of USD 1 million = USD 900000+ USD 500000 = USD 1400000
1000000*(1+0.013333)^n = 1400000
=> 1.0133333^n = 1.4
Taking natural log of both sides
n = ln(1.4)/ln(1.013333) = 25.40
So, no of months required is 25.40 or 26
So, after 2 years and 2 months , Mr Ahmet will be able to buy the houses
If I was Mr. Ahmet, I would analyse the risk and return of various possible investment opportunities and invest about 50% in riskfree bonds, or Time deposits and remaining in Stocks and Mutual Funds
