FIN 254

Submitted to: Mirza M. Ferdous

Submitted by: Seefat Rafique Afifa Sultana Savera Mizan Naureen Islam Parvez Ahmed Israt Jahan 1010368030 1111121030 1010303030 061 429 030 073 053 030 0920751030

Date of Submission: April 16, 2012

Answer to Question number 2 Firstly, the information on the inflation rate that has been derived is: The inflation rate in Bangladesh was last reported at 14.6 percent in mid March The two savings schemes (DPS) that have been selected are: 1. Monthly Savings Schemes from Standard Chartered Bank 2. Peace of Mind Savings Plan from The Hongkong and Shanghai Banking Corporation Limited (HSBC)

Details:

Monthly Savings Schemes

Standard Chartered Bank

DPS Type: Monthly Deposit Minimum Installment: BDT 1,000/month Initial Deposit: BDT 10,000 Maturity Period: 36 Months (3 years) Maturity Amount: BDT 53,018 Rate of Return: 5%

ANALYSIS: The rate of return of 5% will give a depositor an amount of BDT 53,018 if one deposites BDT 10,000 and gives monthly installments of BDT 1000, to amount to a total of BDT36000. If the total investment is counted, it reached to 46000 in 3 years including the initial investment. Thus the present value is BDT 46000. With the interest factor being 5%, after 3 years we will receive: PV * FVIF5%, 3yrs = FV Or, 46000 *1.158 = 53268 approximately equaling BDT 53,018 Although the inflation rates are high and they are likely to keep rising, the amount to be received in 3 years time is worth 46000 now. Thats good enough for an initial investment of only BDT 10,000 followed by monthly installments of only BDT 1000.

Smart Savers Plan

The Hongkong and Shanghai Banking Corporation Limited (HSBC)

Minimum Installment: Convenient monthly installments of BDT 1,000; BDT 2,400; BDT 4,700 & BDT 23,062 Initial Deposit: Ideal units of BDT 5,000; BDT 50,000; BDT 100,000 & BDT 500,000. Maturity Period: 3 years Rate of Return: between 5 to 7.5% with an average of 6.25% Maturity Amount: BDT 48831; BDT 162452; BDT 320617; BDT 1584306

ANALYSIS: The rate of return of 6.25% will give a depositor an amount of BDT 48831if one deposits BDT 5,000 and gives monthly installments of BDT 1000, to amount to a total of BDT36000. If the total investment is counted, it reached to 41000 in 3 years including the initial investment. Thus the present value is BDT 41000. With the interest factor being 6.25%, after 3 years we will receive: PV * FVIF5%, 3yrs = FV Or, 41000 *1.191 = 48831 The amount to be received in 3 years time is worth 41000 now. Thats good enough for an initial investment of only BDT 5,000 followed by monthly installments of only BDT 1000. But this investment would give one a lower return than SCB since the initial investment is high despite lower rate of return than HSBC. SCB is perfectly worthwhile, whereas HSBC is still a good SMART saving scheme.