Answer to Question #199765 in Financial Math for Esaya Chauke

Question

Give your answer to this question correct to the nearest rand. Phindile invests R12 795,00 now and RX

in eight months’ time. The investment earns interest at an interest rate of 11% per annum, compounded

monthly. Phindile’s goal is to have R21 592,00 after one and a half year. What is the value of X?

Answer 1

We will first calculate the future value of amount invested now:

Excel function is used for calculation of future value: =FV(rate,nper,pmt,pv)

In this case, rate is the value of interest compounded monthly and nper is the months for investment. Pmt is known as the periodic payment made but here the present value is used as initial investment instead(pv).

Now how much we need in order to achieve the future goals?

$Future\space value =2159200-1507899.64\\=651300.36$

To find the value of X, we will find the present value of the above future goal remains:

In this case, rate is the value of interest compounded monthly and nper is the months for investment. Pmt is known as the periodic payment made but here the Future value is made as initial investment instead(fv).

So, the value of X is 594500.34.