Financial management

Question 6 [9]

Your friend Lilly wants to invest in an annuity for 5 years in order to have at least R100 000 at

the end of the five-year investment. She needs at least R100 000 to invest in a rental property.

Her financial advisor offered her the option to invest in an annuity from which she will receive

interest of 7% per year. She will, however, have to invest R18 000 at the end of each year for

the five-year period.

Required:

6.1 Calculate the future value of this annuity. (6)

6.2 Advise Lilly whether she should invest in this annuity.