Question 1

1.1 A company needs to save money in order to purchase equipment that will cost R50,000 in 5 years time. A savings account with a into a savings account and the interest is 16% compounded annually. What amount of money can you expect in your savings account after a period of 4 years?

1.2 You deposit R10,000 into a bank account at the end of each year. The account offers earnings of 8% per year. How much would you have saved after 10 years?

1.3 An earthworks contractor need to determine whether to buy a new excavator for cash or to take out a loan to the excavator. The contract has the money available for the purchase. The money is invested in a savings fund that earns the contractor 5% APR. Perform calculations and recommend the best option to the contractor. Show all your calculation steps.

Cost of the excavator = R750,000. The manufacturer offers a 5% discount for cash purchases. APR for the loan option = 14% and the loan term is 48 months.