ANNUITY

1. Kago decides that he would like to start building a house in six years’ time. He
immediately starts depositing P9 000 each month into an account earning 7.87%
interest per year, compounded monthly. How much will Kago have when he starts
building?
2. Determine the present value of five equal payments of P2 500 per year at 7% per
year where the payments are made at the beginning of each year.
3. Determine the amount that you can withdraw every six months over a period of 5
years from your saving account if an amount of P285 346.37 is available at an
interest rate of 8% compounded every six months.
4. A student registered for a four-year degree has a fund of P40 000 available to
cover expenses over the next four years. What is the amount of periodic
withdrawals at the end of each month if the interest rate is 7.5% per year,
compounded monthly?
5. Thabo took out a retirement annuity with an annual payment of P6 500 that
increases by P1 700 each year. If money is worth 10% per annum, how much is
the annuity worth after 20 years?
6. The Army fund was created for Prince after he had lost a leg in a battle. The fund
has undertaken to pay him P19 000 every second month indefinitely. If an
interest rate of 9.5% per year compounded every second month, then calculate
the opening balance of the fund?