John needs to complete the last year of high school. After completing the last year of high school, he will then go through the School of Mining Engineering at Wits University. John will need R100 000 per year for four years, starting next year. That is, John will need to withdraw the first R100 000 one year from today. John’s uncle offers to put him through the School of Mining Engineering. He will deposit a sum of money in a bank. The bank will pay 7% interest per annum compounded monthly. The sum of money deposited will be sufficient to provide the four payments of R100 000 each. The uncle decides to make the deposit today. How much should the uncle deposit today?

Answer rating: 100% (QA)

To calculate the amount the uncle should deposit today we need to find the present value of ... View the full answer