Question
1) The manager of a pension fund knows that a lump-sum payment of Kshs. 5,000,000 must be made in 10 years from now. She wishes
1) The manager of a pension fund knows that a lump-sum payment of Kshs. 5,000,000 must be made
in 10 years from now. She wishes to invest an amount today in a Guaranteed Investment Contract (GIC)
so that it will grow to the required amount. She observes an interest rate of 6% compounded
semi-annually. How much should she invest today in the GIC?
2) Find the amount to which Kshs. 15,000 will grow at 12 per cent compounded quarterly for 5 years?
3) What is the future value of an ordinary annuity of Kshs. 400 per year of 10 years at 10 per cent?
4) Mark Oketch borrows Kshs. 246,000 from Kenya Commercial Bank and agrees to repay the loan
in monthly payments at the end of each month for the next 2 years. The bank receives a 24 per
cent interest on the loan. Determine the monthly payments.
5) Find the present value of an annuity of $2,000 received semi-annually at the beginning of the year for the
next 6 years discounted at 12%.
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