Step 1- Problem or Opportunity Statement
I saw bank offered gadget as gift that can be chosen by their customer depends on how long they agree to hold their money in the bank.
Based on their program, I think Samsung Galaxy S III Mini will be my target! If I want to get S III mini, I have to put IDR 35.000.000 for 24 months of holding period. I’ve already checked the price of Samsung SIII mini, which is IDR 2.800.000.
I want to analyze, is that program really give me a benefit?
Step 2 – “FEASIBLE alternatives”
If right now I have IDR 35.000.000 available, I will compare whether to:
1.Join the bank program: put IDR 35.000.000 for 2 years, then I will get Samsung Galaxy SIII mini immediately
2.Buy Samsung Galaxy SIII mini IDR 2.800.000 with my own money, then the rest of money IDR 32.200.000 goes to fixed deposit saving for 2 years.
3. Buy Samsung Galaxy SIII mini IDR 2.800.000, then the rest of money (IDR 32.200.000) will be put in mutual fund with uncertain interest.
Step 3- Develop the outcomes for each alternative (minimum 2)
1. F = IDR 35.000.000
2. P = IDR 32.200.000
i = 12 months is 6% à 12/6% = 0.5% per month
N = 24 months
F = P(F/P, i%, N)
F = 32.000.000 (1.1272)
F = 36.295.840
3. In Mutual Fund, there is uncertainty in market situation. My prediction is:
Worst situation probability: 50%, investment rate = -10%
Moderate situation probability: 35%, investment rate = -15%
Best situation: 15%, investment rate = 25%
P = IDR 32.200.000
Step 4- Selection of the acceptable criteria
I will choose the highest output while I also get Samsung S III mini.
Step 5- Analysis/ Comparison of the Alternatives against the Criteria
Based on decision tree, highest outcome is fixed deposit, as it can increase my money’s value IDR 32.200.000 to IDR 36.295.840 with 6% rate of interest per year for 2 years. Mutual fund can give me higher outcome but as there is also worst probability, the outcome is IDR 35.492.450 (still higher than the bank’s scheme of “gadget gift”).
Step 6- Selection of the Best/ Preferred Alternative Compared against the Criteria
Given the options, I will choose to just buy Samsung Galaxy SIII mini with my own money then put the rest to fixed deposit saving.
Step 7- Performance Monitoring and Post Evaluation of Result/ Follow up Assessment
For better gain, I will search another option of fixed deposit saving that can give me more than 6% interest, probably in another bank.
Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). The Time Value of Money. In Engineering Economy (15th ed., pp. 104-162). Upper Saddle River, N.J: Prentice Hall.
Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Probabilistic Risk Analysis. In Engineering Economy (15th ed., pp. 478-521). Upper Saddle River, N.J: Prentice Hall.
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