Question Statement: Cheng Lai lives at home with his mother, father, and two brothers. He recently started a job and is

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Question Statement: Cheng Lai lives at home with his mother,father, and two brothers. He recently started a job and is planningto move into his own flat. He wants to buy a flat three years fromnow, knowing that he will need a deposit of at least £8,000 inorder to do so. Cheng Lai has just received a sum of £3,000 from atrust fund his parents set up for him when he was a baby. He hasdeposited the £3,000 into a savings account.
2.1 If Cheng Lai uses all his savings and saves £75 per month,what rate of return will he need to reach his target of £8,000after three years?
2.2 Cheng Lai has seen that shares (equities) in a particularhigh-tech start-up company have given a 12 per cent return eachyear, over the past two years. He is considering using all histrust fund money to buy shares in this company. Give two reasonswhy putting all his trust fund money into this one company’s sharesmight not be the optimum strategy.
2.3 Cheng Lai can obtain a rate of return on his savings thatwill enable him to reach his target deposit, if he commits to asavings plan that runs for five years (rather than three) with noscope for early withdrawals. Identify two financial disadvantagesof waiting an extra two years before offering the deposit to buy afirst home.
2.4 How will Cheng Lai’s efforts to save for a deposit beaffected if there is a sharp rise in interest rates which causes afall in house prices?