Question

Mr. Varun has been saving RM 450 every month in XYZ Bank for the past 9 years. He plans to buy a house worth RM 450,000 with a 10% down payment towards financing the house. What is Mr. Varun’s accumulated savings in XYZ Bank if the bank offers him an interest of 4 % compounded monthly for the first 5 years and 3.5% compounded monthly for the rest of the period?

a) RM 49,372
b) RM 55,600
c) RM 62,178
d) RM 67,294

Answer 1

To calculate Mr. Varun's accumulated savings in XYZ Bank, we divide the savings period into two parts: the first 5 years and the remaining 4 years. Using the formula for compound interest, we can calculate the accumulated amounts for each period. The total accumulated savings is the sum of the two amounts.

Step-by-step explanation:

To calculate Mr. Varun's accumulated savings in XYZ Bank, we need to divide the savings period into two parts: the first 5 years and the remaining 4 years.

For the first 5 years, we can use the formula for compound interest: A = P(1+r/n)^(nt), where A is the accumulated amount, P is the principal amount, r is the interest rate, n is the number of times interest is compounded per year, and t is the time in years. In this case, P = RM 450, r = 4% / 100 = 0.04, n = 12 (compounded monthly), and t = 5. Plugging in these values, we get:

A = 450(1+0.04/12)^(12*5) = RM 510.15

For the remaining 4 years, we can use the same formula with different values: P = RM 450, r = 3.5% / 100 = 0.035, n = 12, and t = 4. Plugging in these values, we get:

A = 450(1+0.035/12)^(12*4) = RM 513.38

Therefore, Mr. Varun's accumulated savings in XYZ Bank is the sum of the two amounts:

Total accumulated savings = RM 510.15 + RM 513.38 = RM 1,023.53