Answer to Question #192460 in Financial Math for Beauty Magadlela

Question

Bonita invested R40 000 in order to have R56 000 available in 30 months' time. The yearly rate, compounded semi-annually, is

[1] 7,21%.

[2] 16,00%.

[3] 8,00%.

[4] 14,41%.

[5] 13,92%.

Answer 1

GghhhhhInvestment = 40000

Amount in 30 months = 56000

Months = 30

Hal yearly terms (n) = 30/6 =5

Interest rate for 6 months = r

Therefore;

$=> 40000\times(1+r)^n = 56000$

$=> (1+r) ^5 = \frac{56000}{40000}$

$=> 1+r = 1.40^{(\frac{1}{5})}$

$=> r = 1.0696 - 1$

$=> r = 0.0696$

$=> r = 6.96\%$

Therefore, Interest rate per annum

$6.96\%\times2 =13.92\%$