Question
a. Explain what an annuity is, and distinguish between an annuity due and an ordinary annuity. (3 + 3 +3 = 10 marks) b. An
a. Explain what an annuity is, and distinguish between an annuity due and an ordinary annuity. (3 + 3 +3 = 10 marks)
b. An investment of N$120,000 is made for three years at 20% per annum. Calculate the future value or the terminal value of the investment. (5 marks)
c. What is the value of an amount of N$100,000 invested annually for 5 years at an interest rate of 20% per annum? (5 marks)
d. FNB Namibia advertises that investors can become millionaires in 20 years given a rate of interest of 20% compounded annually. What is the annual investment that an investor should make to reach the objective of becoming a millionaire? (10 marks)
e. An investment will result in a receipt of N$80,000 two years from now. The applicable discount rate is 20% per annum. Calculate the present value of the N$80,000 or the amount that an investor would be prepared to invest in order to receive the N$80,000. (10 marks)
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