Cheng Lai lives at home with his mother, father, and two brothers. He recently started a job and is planning to move into his own flat. He wants to buy a flat three years from now, knowing that he will need a deposit of at least £8,000 in order to do so. Cheng Lai has just received a sum of £3,000 from a trust fund his parents set up for him when he was a baby. He has deposited 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 £8,000 after three years? (3 marks) 2.2 Cheng Lai has seen that shares (equities) in a particular high-tech start-up company have given a 12 per cent return each year, over the past two years. He is considering using all his trust fund money to buy shares in this company. Give two reasons why putting all his trust fund money into this one company's shares might not be the optimum strategy. (4 marks) 2.3 Cheng Lai can obtain a rate of return on his savings that will enable him to reach his target deposit, if he commits to a savings plan that runs for five years (rather than three) with no scope for early withdrawals. Identify two financial disadvantages of waiting an extra two years before offering the deposit to buy a first home. (4 marks) 2.4 How will Cheng Lai's efforts to save for a deposit be affected if there is a sharp rise in interest rates which causes a fall in house prices?
