a. 8,000 was invested by Albert for eight years. The interest rate offered was

4.28 % compounded monthly for the first three years of investment. After three

years, Albert invested another 5,000 into the account with the interest rate 6.4 %

compounded quarterly for the rest of the period. Find the accumulated amount in his

account at the end of the investment period.

(8 marks)

b. Margaret opened an account of 1,500 for her daughter as a present for her when

she was 7 years old. The account paid 4 % compounded monthly. When her daughter

was 17 years old, Margaret deposited 100 every end of the month until her

daughter was 19 years old.

i. Find the amount accumulated in the account when her daughter was 17 years

old.

(3 marks)

ii. Find the amount accumulated in the account when her daughter was 19 years

old.

(10 marks)

FBA/PFS1153/APRIL2022

CONFIDENTIAL/3

c. Razak intends to take a loan to finance his business. He compares two options,

namely A and B. Option A is a simple interest promissory note which offers

8,000 for three months with a simple interest rate of 10 % per annum. Option B

offers 8,000 with a bank discount rate of 10 % for three months.

i. Compare the value of interest in option A with the bank discount amount in

option B.

(10 marks)

ii. Find the amount received by the borrower in each case.

(4 marks)

iii. Find the maturity value for each option.

(2 marks)

iv. Justify the better option for Razak.