Answer: To calculate how much Muhammad should invest now in order to reach his financial goal of RM1,000,000 in 20 years, we can use the formula for compound interest:
Future Value = Present Value * (1 + Interest Rate)^Number of Periods
Where:
Future Value is the desired amount (RM1,000,000)
Present Value is the amount Muhammad should invest now
Interest Rate is 10% per annum (0.10)
Number of Periods is 20 years
Substituting the values into the formula:
RM1,000,000 = Present Value * (1 + 0.10)^20
To find the Present Value, we rearrange the formula:
Present Value = RM1,000,000 / (1 + 0.10)^20
Calculating this equation gives us:
Present Value = RM1,000,000 / (1.10)^20
Present Value ≈ RM1,000,000 / 6.7275
Present Value ≈ RM148,588.14
Therefore, Muhammad should invest approximately RM148,588.14 now in order to reach his financial goal of RM1,000,000 in 20 years with a 10% return per annum in the Public Mutual Fund.