QUESTION THREE

3.1 Your parents set up a trust fund for you 18 years ago that is now worth R32 786,51. If the fund (5 marks) earned 6% per year, how much did your parents invest? Suppose you are offered an investment that will allow you to double your money in 8 years. You have R10 000 to invest. What is the implied rate of interest?

3.2 (7 marks) Suppose you have a 1-year old daughter and you want to provide R81 000 in 19 years towards her college education. You currently have R2 000 to invest. What interest rate must you earn to have the R81 000 when you need it?

3.3 (7 marks) Suppose you want to buy a new house. You currently have R15 000 and you figure you need to have a 10% down payment plus an additional 5% of the loan amount in closing costs. If the type of house you want costs about R150 000 and you can earn 8.1% per year, how long will it be before you have enough money for the down payment and closing costs?