QUESTION THREE

$(20$ MARKS$)$

$3\mathrm{.}1.$ You invest $R5000\mathrm{.}00$ for six years. The interest rate is $10\%$ per annum compounded yearly for the first

two years. The interest rate then changes to $6\%$ per annum compounded monthly for the remainder of

the investment.

$3\mathrm{.}1\mathrm{.}1.$ How much is the investment worth after two years?

$3\mathrm{.}1\mathrm{.}2.$ What is the final value of the investment?

$3\mathrm{.}2.$ You consider buying a business for $R975000.$

The business is expected to run for $4$ years and the following net returns are expected.

YEAR $1$ : R $200000$

YEAR $2$ : R $250000$

YEAR $3$ : R $320000$

YEAR $4$ : R $400000$

Should you buy the business? A project of this type is expected to return at least $12\%$ per annum.