Time value of money: Homework solutions

FMN22A2
 Homework solutions


SPCA

CANSA

Time value of money

 HOMEWORK SOLUTION: SPCA

PMT
PV∞ =
i
5 000
PV∞ =
0.25

= R20 000

Time value of money

 HOMEWORK SOLUTION: CANSA

PMT
PV∞ =
i g
50 000
PV∞ =
0.25  0.12

= R384 615.38

Time value of money

 Homework: Peter

Peter wishes to purchase a motor vehicle from a dealer in Johannesburg for R150 000. His
bank, ABSA, is prepared to lend him the money on condition that he undertakes to repay the
loan monthly over a period of 36 months. Interest is to be charged at 16,5% per annum
compounded monthly.

REQUIRED:
1. What will his monthly instalments be?
2. Present the amortisation table for the last six months.

UNIT 5 : Time value of money

 SOLUTION

[PV] • = R150 000

[N] • =36

[I/Y] • =16.5/12=1.375%

[PMT] • = -R5 310.66*

UNIT 5 : Time value of money

 Solution

P1 P2 Month Instalment Principal Annual Cumulative Principal amount

payment payment interest interest owing at month end

31 31 31 R5 310.66 R4 892.87 R417.79 R25 492.06

32 32 32 R5 310.66 R4 960.14 R350.52 R20 531.92
33 33 33 R5 310.66 R5 028.35 R282.31 R15 503.57
34 34 34 R5 310.66 R5 097.49 R213.17 R10 406.08
35 35 35 R5 310.66 R5 167.58 R143.08 R5 235.50
36 36 36 R5 310.66 R5 238.63 R72.03 0

UNIT 5 : Time value of money

 Homework: Mrs Mbula

Mrs Mbula decided to extend her house by adding a back room. The extension will cost her
R80 000. First National Bank has agreed to give her a loan at a nominal rate of 13,5% per
annum compounded monthly in arrears, provided that she is able to put down a deposit of
10% on the cost price of R80 000.

REQUIRED
1. What will her monthly payments be if the loan is to be paid over a period of 36 months?
2. Present the amortisation table for the 1st 3 years, presented annually.

UNIT 5 : Time value of money

 SOLUTION

(R80 000 * 10%) = R8 000

Therefore PV = R80 000 – R8 000 = R72 000

[PV] • = R80 000 X 90%

[N] • =36

[I/Y] • =13.5%/12=1.125%

[PMT] • = -R2 443.34*

UNIT 5 : Time value of money

 Solution

P1 P2 Year Instalment Principal Annual Cumulative Principal amount

payment payment interest interest owing at year end

R72 000.00
1 12 1 R2 443.34 R20 859.51 R8 460.57 R8 460.57 R51 140.49
13 24 2 R2 443.34 R23 856.46 R5 463.62 R13 924.19 R27 285.03
25 36 3 R2 443.34 R27 284.02 R2 036.06 R15 960.25 R0.01
R7 330.02 R72 000.00 R15 036.06

UNIT 5 : Time value of money