1. Melvin is a recent graduate. It has been his dream to explore the African continent. He...
Question:
1. Melvin is a recent graduate. It has been his dream to explore the African continent. He intends to go to a lake tour in five years' time . He estimates that he will need to buy a used Toyota (Land Cruiser 76) at R350 000 that has a long-range fuel tank and dual battery system. He will also need an additional R25 000 to pay for fuel and supplies. Melvin intends making equal annual payments into a bank account on which he can earn 9,25% interest compounded annually.
• Determine the amount Melvin should pay annually to be able to undertake the tour in five years' time. The first payment will be made at the end of this year.
• Instead of making equal annual payments, Melvin wants to make one lump sum payment, investing it at 9,25%interest compounded annually. What should this lumpsum be?
2. A bank is negotiating a loan. The loan can either be paid off as a lump sum of R100 000 after five years, or in equal payments at the end of each of the next five years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent.
3. Terry, a recent retailing graduate, plans to buy a house valued at R1,5 million. He has applied for a mortgage loan from his bank and has been requested to pay a 20% deposit, with the balance financed at 9% over 20 years. What would his monthly mortgage repayment be?
4. What is the effective annual rate for a credit card that charges 18%,compounded monthly?
5. Calculate and determine which amount is worth more today if you can invest the money at 9% compounded interest per annum.
R10 000 today or
R20 000 after nine years
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe