Future and Present Value Examples | Grade 12 Financial Maths #Finance

in this lesson we are going to practice using the future value and present value formula i must apologize in the previous CashNews.cos i was using the subscript v next to each of my f and p formulas it’s a old habit i picked up in one of a tech one of the textbooks i’ve read but

i know that most of the grade 12 schools in south africa don’t put a v over there so if you’re a bit confused with that i do apologize you guys typically use the formula f and p with and there’s no little subscript v over there all right so here’s the first question you

would like to have 100 000 runs saved in four years an investment scheme offers you an interest rate of seven percent per year compounded monthly determine your monthly payment so let’s just make sure we understand the question you would like to have a certain amount of money saved in the

future so to get there you’re going to use an annuity so you’re going to pay regular amounts each month whereas in grade 11 you would make random deposits whenever you felt like it but in a grade 12 annuity you are gonna make a regular payment and that amount that you pay is gonna be

the same each month that hundred thousand rand is that now or is that in the future that’s in the future so let’s use the future value formula now it’s just a matter of plugging the various numbers in so the 100 000 rand that is the future value so that will go in the place of f x

is the monthly payment we don’t know what that is so we’ll just leave that alone the interest is 7 which is 0.07 but it’s compounded monthly so we’ll have to put it over 12. n is the number of payments that you make well you’re going to be saving for four years and

each year you’re going to make 12 payments so we could say 12 times 4. then we’d say minus 1 and then we say at the bottom we say 0.07 over 12. now it’s just a matter of getting x by itself so what students often like to do is they’ll first take this part over here to the

left by multiplying and then to get x alone you would have to divide by this big expression next to the x and then you could go ahead and type all of that in on the calculator in one step and you will get an answer of one eight one one point two nine so each month you would have to save a thousand

eight hundred and eleven rand and 29 cents so that you would eventually have a final amount of a hundred thousand rand in four years notice they didn’t make any special mention of this person starting their payments later than normal or ending their payments early so we just use use the

normal scenario by taking the number of years and times it by 12. in future questions we’ll see that that can sometimes change and i’ll show you how to modify it when that happens here we have a different question so here we have a question where you take out a Loan of

50 000 rand so that means you go to a bank for example and you ask them for 50 000 rand they will give you the 50 000 run however you will have to pay it back over a period of three years using monthly payments because it’s compounded monthly and then the question wants us to work out that

monthly payment so we always have to make a decision between f and p so that 50 000 rand is that the value of your money in the future or today well that’s today because you’re gonna get your Loan today so we’ll use the p formula this time and now it’s just

a matter of plugging in the different values so the the present value of your Loan is 50 000 rand your monthly payment which is x we don’t know what that is oh and i keep calling this the monthly payment the only reason i’m saying monthly is because we are making

monthly payments in this account however that could also be your yearly payment your quarterly payment there are different types okay then over here we have one minus one plus the interest rate is 12 percent or 0.12 compounded monthly so i’ll say over 12 and then we’ve got a minus then

the n is your number of payments well we’re going to be paying the Loan back in three years on a month by month basis and so that’s going to be 36 months because that’s 12 times 3 then the interest once again is 0.12 over 12. now we just have to get x by itself so

once again you could take this part to the left and then we can divide the 50 000 times 0.12 over 12 we can divide it by this whole big term next to the x like that because now we have x alone and then you can just go type this all in on the calculator and you should get a final monthly payment

value of 1660 rand and 72 cents