Superannuation

Superannuation
Series and Applications
HSC Maths

www.primeeducation.com.au
Superannuation 1
Series and Applications

Question 1

A woman invests $50 000 on the condition that she is repaid in 10 equal annual instalments. 3
If she receives interest at the rate of 16% reducible per annum, what is the amount of each
instalment?

Question 2

A store offers a loan of $5000 on a computer for which it charges interest at the rate of 1% per
month. As a special deal, the store does not charge interest for the first three months however,
the first repayment is due at the end of the first month.
A customer takes out the loan and agrees to repay the loan over three years by making 36 equal
monthly repayments of $M.
Let $An be the amount owing at the end of the nth repayment.

(a) Find an expression for A3. 1

(b) Find an expression for A5. 1

(c) Find an expression for A36. 1

(d) Find the value of M. 3

Question 3

Beth places $220 into an account at the beginning of every month. Compound interest of 3
0.9% per month is paid on the account. Find the value of the investment at the end of six years.

Question 4

Annie pays $900 into a superannuation fund at the beginning of every quarter, beginning on
1 January, 1991. Compound interest of 1.6% per quarter is paid on the account.

(a) To what value will the first $900 have accumulated when Annie retires on 1 January 2
2016?

(b) What is Annie’s total superannuation worth when she retires? 3

(c) How much interest did Annie earn in total? 1

www.primeeducation.com.au superannuation
2 Superannuation
Series and Applications

Question 5

Scarlet pays $80 into a superannuation fund at the beginning of every month. The compound 3
interest paid on the fund was originally 0.9% per month, but decreased to 0.85% per month at
the end of four years. What is the total investment worth at the end of seven years?

Question 6

Luke invested $4000 at the beginning of every year for 15 years. Find the total of his 3
investment at the end of the 15 years if interest is compounded annually at 7% per annum.

Question 7

Simon placed $2000 into an account for his daughter on the day of her birth and added 3
$2000 every year on her birthday. Compound interest of 8% per annum is paid annually. What
was the value of the account on the daughter’s 17th birthday, the last lot of interest having just
been paid?

Question 8

Tiffany spends $9000 in a store and uses the store’s repayment plan. This has no deposit and no
interest for the first 12 months (although the first repayment must be made after the first month).
The interest rate charged is 1.2% per month and the term of the loan is 3 years. $M is the amount
of each monthly repayment and $ An is the amount owing after n months.

(a) Find an expression for the amount Tiffany owes after 12 months. 2

(b) Find an expression for the amount owing after 15 months. 2

(c) Find the value of M. 3

Question 9

Bradley pays $100 into an account at the beginning of every month for two years. 3
Compound interest of 0.6% per month is paid on the account. At the end of two years Bradley
decides not to pay any more money into the account, but he does not withdraw the money.
What is his investment worth at the end of a further two years?

superannuation www.primeeducation.com.au
Superannuation 3
Series and Applications

Question 10

Gemma borrows $18000 and agrees to repay the principal plus interest in equal monthly 3
instalments over four years. Reducible interest of 0.7% per month is charged on the amount
owing. Find the amount of each monthly instalment.

Question 11

Matthew starts work at the beginning of 2000. If he retires at the end of 2027, how much 3
superannuation will he have if he invests $700 at the beginning of each year at 12.5% per
annum?

Question 12

A man pays $2000 into a superannuation fund at the beginning of every year for nine years.
Interest at 7% p.a. is compounded annually.

(a) Explain why the value of the total investment at the end of nine years, ($v), is given 2
by: v  2000  1.07  2000  1.072   2000  1.079 .

(b) Find $v, correct to the nearest dollar. 3

Question 13

At the end of each financial year Craig invests $4000 into a superannuation fund that pays 3
8.5% p.a. interest compounded annually. The first payment was made in June 1989. What will
Craig’s investment be worth at the end of June 2015, the last investment and the final amount
of interest having just been paid?

Question 14

A superannuation fund pays an interest rate of 8.75% per annum which compounds annually. 3
Stephanie decides to invest $5000 in the fund at the beginning of each year, commencing on
1st January 2003. What will be the value of Stephanie's superannuation when she retires on 31
December 2023?

www.primeeducation.com.au superannuation
4 Superannuation
Series and Applications

Fully Worked Solutions

Question 1
Suppose the annual instalment is p.
Total amount of money at the end of:
1st year: 50000  1.16  p
2nd year: 50000  1.162  p  1.16  p
10th year: 50000  1.1610  p  1.169  p  1.168  p
 50000  1.16   p  1.16  p  1.16 
10 9 8
 p
1.1610  1
 50000  p  0
1.16  1
1.1610  1
p  50000
1.16  1
1.16  1
p  50000   10345.05
1.1610  1
Question 2
(a) A1  5000  M
A2  5000  M  M  5000  2M
A3  $5000  M  M  M  5000  3M
(b) A4   5000  3M   1.01  M
A5   5000  3M   1.01  M   1.01  M
  5000  3M   1.012  M  1.01  M
  5000  3M   1.012  M 1  1.01
(c) A6  A5  1.01  M
  5000  3M   1.012  M 1  1.01  1.01  M
  5000  3M   1.013  M 1  1.01  1.01  M
  5000  3M   1.013  M 1.01  1.012   M
  5000  3M   1.013  M 1  1.01  1.012 
A36   5000  3M   1.0133  M 1  1.01   1.0132 
(d) A36   5000  3M   1.0133  M 1  1.01   1.0132   0
M 1  1.01   1.0132    5000  3M   1.0133
1.0133  1
M  5000  1.0133  3M  1.0133
1.01  1
1.0133  1
M  3M  1.0133  5000  1.0133
1.01  1
 1.0133  1 
M  3  1.0133   5000  1.0133
 1.01  1 

superannuation www.primeeducation.com.au
Superannuation 5
Series and Applications

5000  1.0133
M  $161.34
1.0133  1
 3  1.0133

1.01  1
Question 3
A1  $220  1.009
A2  $220  1.0092
A72  $220  1.00972
A1  A2   A72  220  1.009  220  1.0092   220  1.00972
 220 1.009  1.0092   1.00972 
1.009 1.00972  1
 220   $22350
1.009  1
Question 4
(a) 25 years is equivalent to 100 quarters
Q100  $900  1.016100  $4401.627 681  $4402
(b) Q1  900  1.016
Q2  900  1.0162
Q100  900  1.016100
Q1  Q2   Q100  900  1.016  900  1.0162   900  1.016100
 900 1.016  1.0162   1.016100 
1.016 1.016100  1
 900   $222353
1.016  1
(c) Interest  $222353  100  $900  $132353
The total interest earned is $132 353, to the nearest dollar.
Question 5
for the first four years:
80  1.00948  80  1.00947   80  1.009
 80 1.00948  1.00947   1.009 
1.009 1.00948  1
 80 
1.009  1
for the next three years:
1.009 1.00948  1
80   1.008536  80  1.008536  80  1.008535   80  1.0085
1.009  1
1.009 1.00948  1
 80   1.008536  80 1.008536  1.008535   1.0085
1.009  1
1.009 1.00948  1 1.00851.008536  1
 80   1.0085  80 
36
 $9918
1.009  1 1.0085  1
Question 6
A1  4000  1.07
A2  4000  1.072

www.primeeducation.com.au superannuation
6 Superannuation
Series and Applications

A15  4000  1.0715

A15  4000  1.0715
A1  A2   A15  4000  1.07  4000  1.072 + +4000  1.0715
 4000 1.07  1.072 + +1.0715 
1.0715  1
 4000   $107552
1.07  1
Question 7
A0  2000
A1  2000  1.08
A17  2000  1.0817
A0  A1  A2   A17  2000 1  1.08  1.082   1.0817 
1.0818  1
 2000   $74900
1.08  1
Question 8
(a) A12  9000  12M
(b) A13  A12  1.012  M   9000  12M   1.012  M
A14  A13  1.012  M   9000  12M   1.0122  M  1.012  M
A15  A14  1.012  M   9000  12M   1.0123  M  1.0122  M  1.012  M
  9000  12M   1.0123  M 1.0122  1.012  1
(c) A36   9000  12M   1.01224  M 1  1.012   1.01223   0
1.01224  1
 9000  12M   1.01224  M  =0
1.012  1
1.01224  1
9000  1.012  12M  1.012  M 
24 24
=0
1.012  1
1.01224  1
12M  1.01224  M  =9000  1.01224
1.012  1
 1.01224  1 
M  12  1.01224   =9000  1.012
24

 1.012  1 
9000  1.01224
M=  $274.84
1.01224  1
12  1.012 24

1.012  1
Question 9
100  1.00625  100  1.00626   100  1.00648
 100  1.00625 1  1.006   1.00623 
1.00624  1
 100  1.00625   $2988
1.006  1
Question 10
A1  18 000  1.007  M

superannuation www.primeeducation.com.au
Superannuation 7
Series and Applications

A2  A1  1.007  M
 $18 000  1.0072  M  1.007  M
A3  A2  1.007  M
 18 000  1.0073  M  1.0072  M  1.007  M
 18 000  1.0073  M 1.0072  1.007  1
A48  18 000  1.00748  M 1.00747  1.00746   1  0
1.00748  1
18 000  1.00748  M  0
1.007  1
1.00748  1
M  18 000  1.00748
1.007  1
1.007  1
M  18 000  1.00748   $442.82
1.00748  1
Question 11
700  1.12528  700  1.12527   700  1.1251
 700  1.125  1.12527  1.12526   1
1.12528  1
 700  1.125   $164155.56
1.125  1
Question 12
(a) A1  2000  1.07
A2  2000  1.072
A9  $2000  1.079
A1  A2   A9  2000  1.07  2000  1.072   2000  1.079
1.079  1
(b) S9  2000  1.07   $25633
1.07  1
Question 13
A26  4000  1.08526
A25  4000  1.08525
A0  4000
T  4000  4000  1.085   4000  1.08526
 4000 1  1.085   1.08526 
1.08527  1
 4000   $278779
1.085  1
Question 14
5000  1.087521  5000  1.087520   5000  1.08751
 5000  1.08751.087520  1.087519   1
1.087521  1
 5000  1.0875   $299604.86
1.0875  1

www.primeeducation.com.au superannuation
8 Superannuation
Series and Applications

www.primeeducation.com.au

superannuation www.primeeducation.com.au