Task 1 – Conventional time deposit with pay-off period 3 years

A businessman deposited onto conventional time deposit the amount of CZK 300,000.00. What will be the amount of capital in 3 years if interest rate amounts to 2% p.a. in

1. yearly interest period,
2. half-yearly interest period,
3. quarterly interest period?

The interest is credited to the deposit and then interest is paid on the deposit.

Task 2 – Guaranteed mutual bond fund

A businessman deposited into a guaranteed mutual bond fund the amount of CZK 300,000.00. In the past years, the average rate of return of this fund was 20%; the minimum pay-off period is 5 years. Let us suppose that the rate of return or interest rate will be unchanged for the period of 5 years. A reason for fixed rate is the fact that important European companies are interested in issuing of the bonds of this fund; these companies are expected to keep economic growth for the relevant period. What is net profit of the businessman after 5 years if we know that the interest on deposit is liable to withholding income tax in the amount of 15%?

Task 3 – Decision-making on investment alternatives

We have at our disposal the amount of CZK 200,000.00 that we can miss for the period of 5 years. We want to valorise this money during these 5 years and we select between the following alternatives.

1. We will deposit money onto conventional time deposit for the period of 5 years at fixed interest rate 2.5% and yearly interest crediting or
2. we will deposit money into a guaranteed mutual fund and it is most probable that the 1 ^st year the rate of return will be 5% and the next years gradually 3%, 1%, 0% a 0%.

Which of these alternatives is more advantageous to us?