QUESTION 3

a). i Mutale with the intention of raising appropriate funds in 2025, deposited K50million in an account, paying a nominal rate of 6%, compounded semi-annually, in 2016. What would this amount be in 2025? ( 2marks)

ii J. Mumba wishes to buy a K68 million worth of an item in 10 years from now, how much should he put aside in a bank account paying nominal rate of 4% on a 1 year deposit? (2marks)

b)i. You have just received a notification that you have won K8000000, second prize in a local lottery. The prize will be paid to you on your 30^th birth day. Your current age is 25 years. What is this prize today if the required rate of return is 10%? (4marks)

ii. Determine the present value of annuity of K 3000 to be received at the end of each year for 15 years when the discount rate is 8%. (2 marks)

iii. Determine the present value of an annuity of K 5000 received at the beginning of each yearfor 10 years at the required rate of return of 10%. (2 marks)