Question 2 (25 Marks)

2.1 You are planning to take a holiday in Mauritius when your current savings of N$100 000 reach N$200 000.

2.1.1 If you plan to take your holiday at the end of five years from now, what annual rate of interest will you have to earn on your savings account? (3)

2.1.2 If you are willing to wait seven (7) years before taking your holiday, what annual rate of interest would be necessary on your savings account? (3)

2.1.3 If you can earn 7% per year compounded semi-annually on your savings account, how long will it take before you have adequate funds to take your holiday?

(4)

Total Marks [10]

2.2 Joseph Vries, an emerging farmer in the Okahandja district, borrowed N$1 500 000, using fixed property as guarantee, at an interest rate of 8% per year, compounded quarterly. Mr Vries agreed to pau off the loan in equal quarterly instalments over a period of 12 years. As a result of severe drought, at the end of five (5) years, Mr Vries requested relief. It was agreed that the interest rate would be reduced to 4% per year.

2.2.1 By how much will the quarterly repayments of Mr Vries be reduced? (15)