Sam is a 40-year-old man who earns a gross salary of $8000 a month. He is a Singaporean and an employee of a Singapore firm. Sam is required to put a certain percentage of his monthly gross salary into his Central Provident Fund (CPF) account. CPF is a mandatory (social security) savings scheme funded by contributions from employers and employees. The table below shows the CPF contribution rates by employers and employees. Sam wants to plan his monthly savings and has tabulated his monthly expenditure as shown in the table. He hopes to save at least 20% of his salary each month after CPF deductions.

(a)
Find the amount of money Sam's employer must contribute to his CPF monthly.

Answer $...
(b)
Determine whether Sam is able to achieve his saving goals by clearly showing your calculations.
(c)
After a year of saving, Sam decides to invest $15 000 of his savings for a period of 5 years. He comes up with 2 investment plans.

Plan A

Sam can invest his money in a 5-year savings bond at the beginning of 2025. The interest rate for the 5-year term is shown in the table. The savings bond compounds annually.

Year from issue date 1 2 3 4 5
Interest per year % 3.19 3.19 3.20 3.28 3.31

Plan B

Sam can invest his money at the beginning of 2025 into an insurance company's fixed deposit account for a period of 5 years, compounded yearly. The interest rate is fixed over the duration of the investment and is determined by the year of issuance.

For example: If Sam had invested his money in 2020, over a period of 5 years, his investment plan would be at an interest of 4.3% compounded yearly over the period of 5 years.

However, the interest rate for 2025 is not yet available. Sam finds the information about the interest rates offered by the insurance company for the last 5 years.

Determine which plan Sam should choose.

Justify the decision you make and show your calculations clearly.

Year from issue date	1	2	3	4	5
Interest per year %	3.19	3.19	3.20	3.28	3.31

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Worked solution

1. Identify the employer CPF contribution rate for Sam.

Sam is 40 years old, so he is in the 55 and below age group.

Employer contribution rate $=17\%$ of gross salary.

2. Calculate 17% of Sam's monthly gross salary.

Monthly gross salary $=\char36{}8000$

Employer's CPF contribution
$=17\%\times 8000$
$=\frac{17}{100}\times 8000$
$=1360$

Answer

$1360

1. Identify and calculate Sam's monthly employee CPF deduction.

Sam is 40 years old, so the employee CPF contribution rate is $20\%$ .

$20\% \times 8000 = 0.20 \times 8000 = 1600$

Employee CPF deduction $= \char36{}1600$ .

2. Find Sam's total monthly expenditure from the expenditure table.

$820+90+1000+80+300+1000+1580=4870$

Total monthly expenditure $= \char36{}4870$ .

3. Calculate Sam's actual monthly savings after CPF deduction and expenditure.

$8000-1600-4870=1530$

Actual monthly savings $= \char36{}1530$ .

4. Compare Sam's actual savings with his target savings of 20% of salary.

Required savings:

$20\% \times 8000 = 1600$

Since $1530<1600$ , Sam is short by

$1600-1530=70.$

Answer

Sam is not able to achieve his saving goal, since he saves only $1530, but needs to save at least $1600.

AI analysis — may contain mistakes.

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