Lowyat.NET: Latest topics by kinwing

To solve a mathemathical issue

kinwing — Fri, 27 Apr 2012 15:42:00 +0800

Hi all,

I have recently raised a mathemathic question in a chinese forum and was trying to seek advice to solve the question that related to financial planning. However, seems no effective solutions were found, and thus after sometimes I would like to post the question here and hope if anyone can teach me how to solve the issue.

The question is shown below:
- 2^n + 5 = 3^n
- 3^a - 2^a = 19
- 3^b - 2^b = 0.4175
- To solve 'a', 'b' & 'n' unknown

Hints:
(3^n - 2^n) = 5
ln(2^n + 5) = n*ln(3)
n*ln(2) + ln(5) ≠ n*ln(3)
n*ln(2) + ln(5) ≠ ln(2^n + 5)
n*ln(2) + ln(5) = ln((2^n)*5)

The abovementioned mathemathic question is related to financial planning topic as I was trying to find out the year to achieve the goal to be financial freedom.

Scenario 1
Inflation Rate: 3.00%
Annual Investment Return: 6.00%
Current Monthly Expenses: 3,000.00
Current Yearly Expenses: 36,000.00
Monthly Income: 5,000.00
Monthly Savings: 2,000.00
Yearly Savings: 24,000.00
Current Investment Portfolio: 0.00

To solve
Number of years to be financial freedom ("n")
Step 1: 24,000*[(1+6%)^n - 1]/6% = [36,000*(1+3%)^n]/6%
Step 2: 24,000 * 1.06^n - 36,000*1.03^n = 24,000 ---> (I fail to proceed on this step )
Use Excel Trial and Error method to solve n as 24.0017593

Scenario 2
Inflation Rate: 3.00%
Annual Investment Return: 6.00%
Current Monthly Expenses: 3,000.00
Current Yearly Expenses: 36,000.00
Monthly Income: 5,000.00
Monthly Savings: 2,000.00
Yearly Savings: 24,000.00
Current Investment Portfolio: 50,000.00

To solve
Number of years to be financial freedom ("n")
Step 1: 24,000*[(1+6%)^n - 1]/6% + 50,000*(1+6%)^n = 36,000*[(1+3%)^n]/6%
Step 2: 400,000*1.06^n + 50,000*1.06^n - 600,000*1.03^n = 400,000
Step 3: 450,000*1.06^n - 600,000*1.03^n = 400,000 ---> (I fail to proceed on this step )
Use Excel Trial and Error method to solve n as 20.7550585

Attached herewith the excel for your reference. (I was trying to upload the file here but fail. So for those who are interested to download the attachment, please go to the chinese forum to download).
http://www.investalks.com/forum/redirect.p...633&pid=1131280

There are 2 possible ways to solve the question:
1）Through excel model Trial and Error
2) Through the drawing of regression graph and moving along the regression line to find the tangent.

Below is the link to the chinese forum (if anyone who knows who to read mandarin) where I post my query and discussion. Appreciate if anyone know any other ways to solve the question other than the 2 methods mentioned above .

http://www.investalks.com/forum/viewthread...3&extra=&page=1

Never trust the bank's marketing pitch

kinwing — Fri, 24 Sep 2010 14:23:34 +0800

As I have read through some of the threads in the forum and notice quite a number of people have a misunderstand that how the car/personal loan being derived and always perceive that the bank is charging a low interest on loans. So I would like to share my thought (it could be right or wrong, so just open a platform for those who might be interested to know more and discuss how the bank charge the interest rate) of which I have posted in my blog previously:-

Tuesday, January 12, 2010
Never trust the bank's marketing pitch

Yesterday I received a call of a telemarketer from Standard Chartered Bank who was trying to persuade me to make a credit card balance transfer to the Standard Chartered account. Too bad that I am debt free so I did not accept the offer from the telemarketer. The telemarketer then offered me another package to make a personal loan of RM7,200 from the bank with only 4.99% charge per annum. He told me there are 3-period selections I can choose to repay the loan, i.e. 9-month, 1-year and 1.5-year.

I was quite curious about the package of RM7,200 loan with the marginal 4.99% annual interest rate charge, so I inquired the telemarketer that whether I can repay the principal plus interest of RM7,559.28 (=RM7,200 * 1.0499) at the end of 1 year if I take up the 1-year loan package? But the fellow told me that I would need make installment to repay the loan for 12 months after a month I receive the loan.

When I was listening to the telemarketer about the installment to repay the loan, I realised that the loan effective annual rate is more than 4.99% per annual. Let me work out some illustrations to show how the marketing trick of the bank to mislead the borrower by pitching a loan promotion with low rate but end up the borrower needs to pay more than the loan rate without realising he is paying more.

If I borrow a loan of RM7,200 with a marginal interest rate of 4.99% to be repaid within 12 months by installment, so each month I need to pay RM629.94 (=[RM7,200*(1.0499)]/12). The effective annual rate can be worked out by using the money weighted average return method (or the so called Internal Rate of Return, “IRR”). By working through trial and error on the IRR in order to make the Net Present Value of the plan to be zero, I am able to get the effective rate to be 9.09%, which is 1.82 times higher than the marginal interest rate of 4.99%. So the effective annual rate for 12-month package is shown as below:-

RM629.94/[(1+IRR)] + RM629.94/[(1+IRR)^2] + …+ RM629.94/[(1+IRR)^11] + RM629.94/[(1+IRR)^12] – RM7,200 = 0

IRR = 0.7572%

Annualised IRR = 0.7572% * 12 = 9.0867%

How about the effective interest rate of the 1.5-year loan of RM7,200? Please refer the calculation shown below:-

Monthly installment = (RM7,200*[1+(0.0499)*18/12])/18 = RM429.94

RM429.94/[(1+IRR)] + RM429.94/[(1+IRR)^2] + …+ RM429.94/[(1+IRR)^17] + RM429.94/[(1+IRR)^18] – RM7,200= 0

IRR = 0.7711%

Annualised IRR = 0.7711% * 12 = 9.25%

From the computation, it is clearly showing that the longer period we take to repay the loan with installment, the higher effective interest rate we have to pay. By knowing I need to pay the loan with principal with interest by installment, I straight away rejected the "kind" offer from the telemarketer.

BTW, I would be charged a 1% processing fee by taking the loan, i.e. RM72...>_<!!

http://kinwing.blogspot.com/2010/01/never-...ting-pitch.html

RCE Capital Berhad

kinwing — Fri, 17 Sep 2010 21:55:53 +0800

Just open a new post related to the jobs offered by the company 'RCE Capital Berhad' ("RCE"). [Note: RCE is a Company listed on the Main Board of Bursa Securities involved in the business of providing financial services.]

As I was called up by RCE for interview at next Monday. The position is 'Executive' ("exec"). So I went to check the job ad as stated below:-
=========================================================================================
JUNIOR EXECUTIVE/EXECUTIVE
(Kuala Lumpur)
Responsibilities:

*
To assist the CEO and senior management in the following:
o
Preparation of reports for decision making purposes
o
Special projects

Requirements:

* Possess a Diploma or Degree in Finance/Marketing/Economics/Accounting or equivalent;
* 1 to 3 years working experience in a financial service industry would be an added advantage;
* Fresh graduates with good academic results are encouraged to apply;
* Must have good command of English, able to write reports and do presentations;
* Computer literature; familiar with Microsoft Office. Knowledge in powerpoint (intermediate to advanced level) is essential;
* Possess creativity particularly in preparing reports;
* Accountability, accepting absolute responsibility for all tasks assigned and able to meet project deadlines;
* Highly analytical, motivated and a team player with good interpersonal skills;
* Strong organizational skills, quick to learn new concepts and work independently;
* Flexible, resourceful and passionate in his/her work.
=========================================================================================

After reading the the job ad, I found the job scope for this exec post is too general. Does anyone have any idea about what exactly the job scope of the post as refer to the abovementioned?

I'm thinking what kind of reports the exec need to prepare? Would that be some kind of corporate planning or investment report? And the so-called 'Special Projects' is even making me more puzzling .