Financial maths grade 11: Exam #Finance

in this question we have a school that is going to invest 60 000 rand in order to put up floodlights three years later the interest rate is going to drop uh four years after the first investment 10 000 is withdrawn what is the investment worth after 13 years so i think we can make a

timeline for this one i always like to make two timelines one for the payments and one for the interest rate it just helps keep things nice and clear so we know that this question is about 13 years so we’re going to start at t0 and it would end off after 13 years we start by or they start by

investing 60 000 rand and then for the next payment is after four years so at t4 they are going to take away 10 000 rounds so i just put a minus over here and that’s going to be 10 000 rand that is taken away now we need to look at the interests so they tell us that it’s going to be 12

percent compounded monthly then it changes three years later okay so for the first three years so that’s up to there the interest rate is 12 compounded monthly so i’ll just say 12 monthly then it changes by it drops by one percent and then it looks like it doesn’t change again so

it says three is that the interest rate drops by one percent and it’s going to become quarterly so that’ll go all the way to the end because they don’t change it again so that means we’ll now have 11 but now it will be quarterly now the way that i like to do these financial

maths timeline questions is the following i ch i look at the payment so it’s this one and this one and i take the first one which is the 60 000 and then i completely ignore the other one like as if it’s not even there and then what i do is i take the 60 000 and i work out how much will

it be worth after the 13 years and i must also make sure that i look at the Interest Rates as well okay so we know that we can use the compound interest formula which is p1 plus i to the n and so the p is going to be 60 000. actually let me write this somewhere else i’m going

to run out of space so that’s going to be 60 000. then i’m going to look at the first interest rate which is 12 percent so i’m going to say 0.12 you might say 12 on your calculator that’s fine and that’s going to be 3 years that’ll be 3 times 12. then your

teacher probably also did it like this if the interest rate then changes you don’t have to go work this out you just put another bracket and so that’s going to be the next interest rate which is going to be the quarterly so that’s dividing by 4 and that’s going to be for 10

years so i’ll say 10 times 4. then i would go ahead type this all in and let’s see what we get for this one and so that’s going to be now don’t round off because it’s not our final answer 093.7183 so that is what that 60 000 rand would have become so now i’ve

done the 60 000 rand and so you ignore that then you go to the next payment and so that’s going to be this one over here and remember that that starts at t4 so the only interest rate that it will experience is only going to be the 11 quarterly it will not have this one because that one only

happens between t0 and t3 so we can go work that one out so i’m just going to say that this one is for the 10 000 rand okay so we can use the same formula so it’s a equals to 10 000. some of you might be like kevin this one’s a minus doesn’t that change anything not at all

guys it just means we’re going to minus it at the end but it doesn’t change any of the calculations now that one only ex that one only has the quarterly interest rate so that’s going to be 0.11 now be careful it’s not going to be 10 times 4 like the previous one because this

one only starts at t4 so that’s going to be 9 years so we say 9 times 4 and that’s it you just go calculate that now and so that’s 2 6 5 four now don’t round off because it’s not the final answer and then you just put everything together so because this one has a minus

you will just minus it so the total for this uh school or whatever it is is going to be 254093.7183 minus 26554 0.97517 and that should give us 2 2 7 5 thank you very much for watching