Question
A lump-sum deposit of N$5 000 is made now into an investment account that pays 6% p.a. Withdrawal of the moneys deposited will be as
A lump-sum deposit of N$5 000 is made now into an investment account that pays 6% p.a.
Withdrawal of the moneys deposited will be as follows;
- Withdrawal of an equal amount end-of-year of N$1 000 for 5 years, starting next year.
At the end of the sixth year, the account will be closed, and the remaining balance be withdrawn.
a) Draw a cash flow diagram indicating the investment and withdrawals
b) Determine the final account balance doing calculation by hand, aided by interest factors
1.2) An energy utility company requires that for each of power generators annual investments be placed into a capital reserve fund to ensure funds being available for unexpected major refurbishment of equipment.
For this purpose, N$5 000 was deposited for 15 years which made N$100 000 available for refurbishments.
a) What rate of return did this practice provide to the company?
(Solve both by hand calculation and MS Excel spreadsheet built-in financial functions)
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