Question

Oshakati Limited is planning to save N$2 500 000 per year for five years. The first deposit at the which is

presently being made at the beginning of the year and all subsequent deposits, will earn interest 12%

per annum.

Required:

a) Calculate the future value for this annuity if interest is compounded semi-annually. (6 marks)

b) Calculate the future value for this annuity if interest is compounded quarterly. (6 marks)

c) How would your answer in part a) have changed if the initial deposit was not made until the end

of the first year?​

Answer 1

Answer:

Oshakati Limited is planning to save N$2 500 000 per year for five years. The first deposit at the which is

presently being made at the beginning of the year and all subsequent deposits, will earn interest 12%

per annum.

Required:

a) Calculate the future value for this annuity if interest is compounded semi-annually. (6 marks)

b) Calculate the future value for this annuity if interest is compounded quarterly. (6 marks)

c) How would your answer in part a) have changed if the initial deposit was not made until the end

of the first year?