Unit 4 Time Value of Money part 2(1).pptx (CMF22A2)

s Pa r t B
A n nuiti e
y –
value of Mone
:Tim e
UNIT 4

, HOMEWORK SOLUTIONS – H4.5: Part A



• Mr Ngwenya = PV = R10 000
Bank A Bank B Bank C



Compounding Annually Semi-annually Quarterly
period

Nominal interest 4% 4% 4%
rate
N= 3 3*2=6 3*4=12

I/Y 4% 4%/2=2% 4%/4=1%

FV R11 248.64 R11 261.62 R11 268.25



Time value of money

, HOMEWORK SOLUTIONS: H4.5 – Part B and C



• Mr Ngwenya = Effective interest rate
Bank A Bank B Bank C



Compounding Annually Semi-annually Quarterly
period

Nominal interest 4% 4% 4%
rate
EFF interest rate 4% 4.04% 4.06%




C) I will choose Bank C


Time value of money

, HOMEWORK SOLUTIONS: H4.6 – Part i



• Tertiary Funding



Variable Option 1 (annuity) Option 2 (lump sum)
N 5 x 12 = 60 5
I/Y 6.5%/12 10%
PV - R50 000
FV 100 000 ?
PMT ? -




Time value of money