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Question 1
A sum of R1000 is due in five months’ time from now, at a
simple interest rate of 12% per annum. The present value of the
sum is
[1] R952,38.
[2] R567,43.
[3] R1050,00. [4] R625,00.
Question answered using the “how to approach a question”
style.
Step 1: Read through the question and identify the type of
problem:
Identification term
A sum of R1000 is due in five months’ time from now, at a
simple interest. rate of 12% per annum. The present value of the
sum is Step 2: Draw a time line:
The situation can be represented by a time line as:
=?
r=12% R1000
now 5months
Step 3: Write down the formula:
This is a simple interest rate calculation as the words simple
interest are found in the question. The formulas that you can use
for simple interest calculations are
S = P(1 + rt) and I = Prt.
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, lOMoAR cPSD| 47715245
Step 4: Identify the given values:
Given is the value due in five months’ time from now, i.e. the
future value (S) of R1000 and the simple interest rate (r) namely,
12%. We are asked to determine the present value of the amount
now. We need to determine a present value of the R1000 or P
now. Given are
S
=
1
0
0
0
r
=
1
2
%
P
=
?
As we want to determine the value now we need to move the
R1000 back in time to now.
t = 5/12
R1 000
P=?
now 5months
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The time period t must always be expressed as years. Thus we
need to change the 5 months to a fraction of a year by dividing
the 5 months by the number of months in a year, namely 12.
Thus
.
Step 5: Substitute the values into the formula and calculate the
unknown value using your calculator:
Step 6: Write down the answer:
R952,38 will be paid nine months from now.
EL-738 and EL-738F HP10BII and HP10BII+
2ndF CA C ALL
Use normal keys Use normal
Enter as keys Enter as
1000 ÷ (1+ (0. 12 × 5 ÷
1000 ÷ (1 + 0.12 × 5 ÷ 12)
12 ) )=
= 952.38 to two decimals is 952.38 to two decimals is
displayed. displayed.
[Option 1]
Question 2
Alton invests R8350 in an account that pays simple interest.
After six years, the amount that he receives back (accumulated
sum) is R12859. The simple interest rate on the investment,
rounded to two decimal places, is
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