DSC1630 May-June 2022 Possible Solutions

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Question 1 (3 marks)
The following is an extraction from an amortisation schedule for a filling station. The loan
will be paid off in 15 years.
Month Outstanding principal Interest due at Payment Principle Outstanding

at the beginning of the the end of the repaid principles at
month month month end
15 R385 232,41 R3 081,86 A R1 119,21 C
120 R202 152,34 R1 617,22 A B R199 568,48
The applicable yearly interest rate is
1
𝑃 = 385 232,41; 𝐼 = 3 081,86; 𝑡= ; 𝑟 =?
12
𝐼 3 081,86
𝑟= = = 0,0960000 (× 100) = 9,6%
𝑃𝑡 385 232,41 × 1
12
A) 8,0%
B) 12,0%
C) 9,6%
D) 8,3%
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DSC1630: Introductory Financial Mathematics: May/June 2022 Possible Solutions
Page 1
An amount of R4 317, 26 was borrowed on 5 May at the simple interest of 15% per year.
The loan will be worth R4 500 on
𝑆 = 4 500; 𝑃 = 4 317,26; 𝑟 = 15%; 𝑡 =?
𝑆 − 𝑃 4 500 − 4 317,26
𝑡= = = 0,282185 𝑦𝑟𝑠 (× 365) ≈ 103 𝑑𝑎𝑦𝑠
𝑃𝑟 4 317,26 × 15%
A) 16 August
B) 21 August
C) 9 October
D) 12 August

Page 2
Month Outstanding Interest due Payment Principal repaid Outstanding

principal at the at the end of principles at
beginning of the month month end
the month
15 R385 232, 41 R3 081, 86 𝐴 = 4 207,07 R1 119, 21 𝐶 = 384 113,20
120 R202 152, 34 R1 617, 22 𝐴 = 4 207,07 𝐵 = 2 583.86 R199 568, 48
𝐴 = 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑑𝑢𝑒 + 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑
𝐵 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑 = 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 − 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑑𝑢𝑒
𝐶 = 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑡 𝑚𝑜𝑛𝑡ℎ 𝑒𝑛𝑑
= 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑡 𝑚𝑜𝑛𝑡ℎ 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 − 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑
The value of B equals
A) R5 818, 29
B) R3 579, 87
C) R1 684, 60
D) R2 583, 85

Page 3
The table below represents the number of loans approved for different amounts during
the second half of 2021. A linear relationship is expected.
Loan amount in R100 000s Number of loans approved

𝒙 𝒚
2 15
3 20
4 18
5 13
6 9
If the loan amount is set at 7 (loan amount in R100 000s), what is the value of the
predicted approximated number of loans approved?
𝐹𝑖𝑛𝑑 𝑡ℎ𝑒 𝑒𝑞𝑢𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑡ℎ𝑒 𝑅𝑒𝑔𝑟𝑒𝑠𝑖𝑜𝑛 𝑙𝑖𝑛𝑒, 𝑦 = 𝑎 + 𝑏𝑥 𝑎𝑛𝑑 𝑢𝑠𝑒 𝑖𝑡 𝑡𝑜 𝑓𝑖𝑛𝑑 𝑦 𝑤ℎ𝑒𝑛 𝑥 𝑖𝑠 7
𝑎 = 22,6; 𝑏 = −1,9; 𝑟 = −0,69845
𝑦 = 22,6 − 1,9𝑥
𝑦 = 22,6 − 1,9(7) = 9,3 ≈ 9
A) 10
B) 9
C) 6
D) 55

Page 4
A discount rate of 14, 29% per year for eight months is equivalent to a simple interest rate
of
8
𝑑 = 14,29%; 𝑡= ; 𝑟 =?
12
𝑑 14,29%
𝑟= = = 0,157947 (× 100) ≈ 15,79%
1 − 𝑑𝑡 1 − 14,29% × 8
12
A) 11, 12%
B) 13, 05%
C) 15, 79%
D) 14, 29%

Page 5
The relationship between dependent variables can be represented by the following graph:
The graph above represents ……… between variable x and y.
A) Perfect positive linear correlation
B) Perfect negative linear correction
C) Positive linear correlation
D) No correlation

Page 6
Deliwe inherits R600 000. She decides to have it paid to her in two payments: one
payment four years from now and the second payment twice the size of the first payment,
eight years from now. If money is worth 12,6% per year compounded quarterly, then the
amount of money that Deliwe expects to receive eight years from now is ………..
∑ 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 = ∑ 𝑂𝑏𝑙𝑖𝑔𝑎𝑡𝑖𝑜𝑛𝑠 (𝑎𝑡 (𝑎𝑡 𝑌𝑒𝑎𝑟 8)
12,6% 4×4 12,6% 8×4

𝑋 (1 + ) + 2𝑋 = 600 000 (1 + )
4 4
𝑆𝑜𝑙𝑣𝑒 𝑡𝑜 𝑔𝑒𝑡 𝑋 = 𝑅444 391,83 (𝐴𝑚𝑜𝑢𝑛𝑡 𝑝𝑎𝑖𝑑 𝑎𝑓𝑡𝑒𝑟 4 𝑦𝑒𝑎𝑟𝑠)
2𝑋 = 2(444 391,83) = 𝑅888 783,67
A) R888 783, 67
B) R444 391, 83
C) R885 317, 96
D) R442 658, 98

Page 7
Masego buys a house and makes a down payment of 35% of the price of the house. He
manages to secure a loan at an interest rate of 13,25% per year, compounded monthly,
for a period of 20 years. His monthly payment is R10 437, 26.
The size of the down payment (to the nearest rand) is………
𝑃/𝑌𝑅 = 12; 𝑃𝑀𝑇 = 10 437,26; 𝐼/𝑌𝑅 = 13,25; 𝑁 = 20 𝑦𝑟𝑠; 𝑃𝑉 =?
𝑃𝑉 = 𝑅877 500,42 𝑤ℎ𝑖𝑐ℎ 𝑖𝑠 65% 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑡ℎ𝑒 ℎ𝑜𝑢𝑠𝑒, 𝑓𝑖𝑛𝑑 𝑡ℎ𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
𝑡ℎ𝑎𝑡 𝑖𝑠 35% 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒
35
× 877 500,42 ≈ 𝑅472 500
65
A) R307 125
B) R472 500
C) R570 375
D) R527 959

Page 8
A businessman buys R100 000 of equipment on the following terms:
Interest will be charged at a rate of 12% per year compounded semi-annually, but no
payment will be made until two years after purchase. Thereafter equal semi-annual
payments will be made for five years. The semi-annual payments (PMT) will be
𝐹𝑉 𝑎𝑓𝑡𝑒𝑟 2 𝑦𝑟𝑠 𝑎𝑡 12% 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦 𝑖𝑠 𝑅126 247,70
𝑈𝑠𝑖𝑛𝑔 𝑡ℎ𝑖𝑠 𝑎𝑚𝑜𝑢𝑛𝑡 𝑎𝑠 𝑃𝑉, 𝑓𝑖𝑛𝑑 𝑡ℎ𝑒 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙 𝑃𝑀𝑇𝑠 𝑓𝑜𝑟 5 𝑦𝑒𝑎𝑟𝑠:
𝑷𝑴𝑻 = 𝑹𝟏𝟕 𝟏𝟓𝟑, 𝟎𝟐
A) R13 586, 80
B) R17 153, 02
C) R29 970, 75
D) R22 343, 84

Page 9
If the modified internal rate of return (𝑀𝐼𝑅𝑅), the future value of all cash flows (𝐶) and
the present value of all cash outflows (𝑃𝑉𝑜𝑢𝑡 ) are given, then the duration of the project
in years (𝑛) can be expressed as…
𝐶
ln
𝑃𝑉𝑜𝑢𝑡
𝐴) 𝑛 = ln(𝑀𝐼𝑅𝑅−1)
𝑪
𝐥𝐧
𝑷𝑽𝒐𝒖𝒕
𝐁) 𝒏 = 𝐥𝐧(𝑴𝑰𝑹𝑹+𝟏)
ln(𝑀𝐼𝑅𝑅+1)
𝐶) 𝑛= 𝐶
ln
𝑃𝑉𝑜𝑢𝑡
𝐶
𝐷) 𝑛 = 𝑃𝑉 − (𝑀𝐼𝑅𝑅 + 1)
𝑜𝑢𝑡

Page 10
The amount of money that should be invested to yield R300 simple interest in 18 months’
time if the interest rate is 9, 5% per year, equals
18
𝐼 = 300; 𝑡= 𝑦𝑟𝑠; 𝑟 = 0,095; 𝑃 =?
12
𝐼 300
𝑃= = = 𝑹𝟐 𝟏𝟎𝟓, 𝟐𝟔
𝑟𝑡 0,095 × 18
12
A) R2 850, 00
B) R4 736, 84
C) R4 275, 00
D) R2 105, 26
An amount of money accumulates to R45 946 at a continuous compounding rate of 8%

after 57 months. The original amount equals….
57
𝑆 = 45 946; 𝑐 = 0,08; 𝑡= ; 𝑃 =?
12
57
𝑃 = 𝑆𝑒 −𝑐𝑡 = 45 946𝑒 −0,08×12 = 𝑹𝟑𝟏 𝟒𝟐𝟎, 𝟕𝟎
A) R31 460, 34
B) R28 486, 52
C) R31 420, 70
D) R33 294, 20

Page 11
Three learners (L, N, and A) are competing for one reward. The school governing body
must choose the winner based on the learners’ marks for three subjects in the first quarter
of the school year. The marks are shown below:
Subject Learners marks Learners marks Learners marks

Lechaba ayaNda mdlAlifa
1 58 75 98
2 74 83 75
3 90 95 67
𝑀𝑒𝑎𝑛 𝑜𝑟 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 (𝐻𝑖𝑔ℎ) 74 84 80
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 (𝐿𝑜𝑤) 16 10 16
𝑇ℎ𝑒 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑚𝑎𝑟𝑘 𝑠ℎ𝑜𝑢𝑙𝑑 𝑏𝑒 ℎ𝑖𝑔ℎ𝑒𝑟 𝑎𝑛𝑑 𝑐𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝑖𝑠 𝑠ℎ𝑜𝑤𝑛 𝑖𝑛 𝑎 𝑙𝑜𝑤𝑒𝑟 𝑆𝐷
Which of the three learners will be chosen for an award based on the average mark and
consistency throughout the quarter?
A) N and A
B) A
C) N
D) L

Page 12
Khanyisile wants to open a baby boutique and on 6 November 2020, she invests
R300 000 into an account earning 9,25% interest per year, compounded monthly. Interest
is credited on the first day of every month. Khanyisile will move into the boutique on 17
July 2021 .If simple interest is used for odd period calculations and compound interest for
full period, then the amount of money that Khanyisile has available on 17 July 2021
is……..
𝐹𝑖𝑟𝑠𝑡 𝑂𝑑𝑑 𝑝𝑒𝑟𝑖𝑜𝑑: 6 𝑁𝑜𝑣 − 1 𝐷𝑒𝑐 2020 (25 𝑑𝑎𝑦𝑠) 𝑢𝑠𝑒 𝑆𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
25
𝑆1 = 300 000 (1 + 9,25% × ) = 301 900,6849
365
𝐹𝑢𝑙𝑙 𝑝𝑒𝑟𝑖𝑜𝑑: 1 𝐷𝑒𝑐 2020 − 1 𝐽𝑢𝑙 2021 (7 𝑚𝑜𝑛𝑡ℎ𝑠) 𝑢𝑠𝑒 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
7
9,25% 12×12
𝑆2 = 301 900,6849 (1 + ) = 318 572,3274336848
12
𝑆𝑒𝑐𝑜𝑛𝑑 𝑂𝑑𝑑 𝑝𝑒𝑟𝑖𝑜𝑑: 1 𝐽𝑢𝑙 − 17 𝐽𝑢𝑙 2021 (16 𝑑𝑎𝑦𝑠) 𝑢𝑠𝑒 𝑆𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
16
318 572,3274336848 (1 + 9,25% × ) = 𝑅319 864,07
365
𝑇𝑜 𝑤𝑜𝑟𝑘 𝑜𝑢𝑡 𝑡ℎ𝑒 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑜𝑛𝑐𝑒, 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑦 𝑡ℎ𝑒 𝑏𝑟𝑎𝑐𝑘𝑒𝑡𝑠 𝑖𝑛 𝑟𝑒𝑣𝑒𝑟𝑠𝑒 𝑤𝑖𝑡ℎ 𝑡ℎ𝑒 𝑃𝑉 𝑎𝑡 𝑡ℎ𝑒 𝑒𝑛𝑑
7
16 9,25% 12×12 25
(1 + 9,25% × ) (1 + ) (1 + 9,25% × ) 300 000 = 𝑅319 864,07
365 12 365

Page 13
A) R319 310, 96
B) R318 572, 33
C) R319 783, 52
D) R319 864, 07

Page 14
The following is the price equation for Bond GWM:
15
96,80770 = 𝑎̅̅̅̅̅ + 32,09888
2 15|𝑖
Where 15 is the number of half years and (𝑖) is the yearly rate.
The yearly yield to maturity equals……
𝐺𝑟𝑜𝑢𝑝 𝑡ℎ𝑒 𝑃𝑉𝑠 𝑜𝑛 𝑜𝑛𝑒 𝑠𝑖𝑑𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑒𝑞𝑢𝑎𝑡𝑖𝑜𝑛 𝑎𝑛𝑑 𝑠𝑖𝑚𝑝𝑙𝑖𝑓𝑦
15
96,80770 − 32,09888 = 𝑎̅̅̅̅̅
2 15|𝑖
15
= 7,5
2
64,70882 = 7,5𝑎̅̅̅̅̅
15|𝑖
𝑇ℎ𝑖𝑠 𝑖𝑠 𝑎𝑛 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑎𝑛𝑛𝑢𝑖𝑡𝑦 𝑤𝑖𝑡ℎ 𝑡ℎ𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 (ℎ𝑎𝑙𝑓 − 𝑦𝑒𝑎𝑟𝑙𝑦) 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
𝑃/𝑌𝑅 = 1; 𝑃𝑉 = 64,70882; 𝑃𝑀𝑇 = 7,5; 𝑁 = 15; 𝐼/𝑌𝑅 =? (ℎ𝑎𝑙𝑓 𝑦𝑒𝑎𝑟𝑙𝑦)
𝑌𝑒𝑎𝑟𝑙𝑦 𝑌𝑇𝑀 = 7,87 × 2 = 𝟏𝟓, 𝟕𝟒%
OR
15
𝑃/𝑌𝑅 = 2; 𝑃𝑉 = 64,70882; 𝑃𝑀𝑇 = 7,5; 𝑁= ; 𝐼/𝑌𝑅 =? (𝑦𝑒𝑎𝑟𝑙𝑦)
2
𝑌𝑒𝑎𝑟𝑙𝑦 𝑌𝑇𝑀 = 𝟏𝟓, 𝟕𝟒%
A) 15, 74%
B) 16, 55%
C) 19, 39%
D) 7, 87%
Page 15
An investment of R7 100 guarantees a return of R1 600 at the end of the first year, R2 600
at the end of the second year and X at the end of the 3rd year. The value X, correct to the
nearest rand, is… given that the net present value (NPV) is R938,18 when the cost of
capital is 6%, compounded annually.
𝑁𝑃𝑉 = 𝑃𝑉𝑖𝑛 − 𝐼𝑜𝑢𝑡
𝐶1 𝐶2 𝐶3
𝑁𝑃𝑉 = + 2
+ − 𝐼𝑜𝑢𝑡
(1 + 𝑖) (1 + 𝑖) (1 + 𝑖)3
1 600 2 600 𝑋
938,18 = + 2
+ − 7 100
(1 + 6%) (1 + 6%) (1 + 6%)3
𝑋 = 5 019,84 ≈ 𝑅5 020
A) R3 539
B) R5 020
C) R4 215
D) R8 038

Page 16
Monthly deposits of R100 each are made into a bank account earning interest at an
interest rate of 18% per annum compounded monthly. The time (in months) that will take
the account to accumulate to R20 000 is given by
18%
𝑆 = 20 000; 𝑅 = 100 𝑖= = 0,015; 𝑛 =?
12
𝑈𝑠𝑖𝑛𝑔 𝑡ℎ𝑒 𝑓𝑜𝑟𝑚𝑢𝑙𝑎 𝑓𝑜𝑟 𝑛, 𝑖𝑛 𝑡ℎ𝑒 𝑓𝑢𝑡𝑢𝑟𝑒 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑛 𝑎𝑛𝑛𝑢𝑖𝑡𝑦 𝑤𝑒 ℎ𝑎𝑣𝑒
𝑆𝑖
𝑙𝑛 [ 𝑅 + 1]
𝑛=
𝑙𝑛(1 + 𝑖)
20 000(0,015)
𝑙𝑛 [ + 1]
100
𝑛=
𝑙𝑛(1 + 0,015)
𝒍𝒏[𝟐𝟎𝟎(𝟎, 𝟎𝟏𝟓) + 𝟏]
𝒏=
𝒍𝒏(𝟏 + 𝟎, 𝟎𝟏𝟓)
A) 𝑛 = 𝑙𝑛[200(0,015) + 1] − 𝑙𝑛 (1,015)
𝑙𝑛[200(0,015) − 1]
B) 𝑛=
𝑙𝑛(1 + 0,015)
𝑙𝑛[200(0,015)]
C) 𝑛=
𝑙𝑛(0,015)
𝒍𝒏[𝟐𝟎𝟎(𝟎, 𝟎𝟏𝟓) + 𝟏]
𝐃) 𝒏=
𝒍𝒏(𝟏 + 𝟎, 𝟎𝟏𝟓)

Page 17
Nare borrowed R700 two months ago and R1 300 four months ago. He wants to liquidate
these obligations with a single payment in 12 months’ time from now. If a simple interest
rate of 11, 59% per year, is charged on all the amounts, the amount he will pay in 12
months’ time is……
16 14
𝑆 = 1 300 (1 + 11,59% × ) + 700 (1 + 11,59% × ) = 𝑹𝟐 𝟐𝟗𝟓, 𝟓𝟓
12 12
A) R2 000, 00
B) R2 168, 05
C) R2 295, 55
D) R2 283, 95

Page 18
You must decide if you are going to invest in investment X. The profitability index (PI), net
present value (NPV), and internal rate of return (RR) of the investment have been
calculated. Which values of these criteria show investment X to be a positive investment
choice?
A) 𝑃𝐼 > 1, 𝑁𝑃𝑉 > 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 < 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
B) 𝑃𝐼 < 1, 𝑁𝑃𝑉 < 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 > 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
C) 𝑷𝑰 > 𝟏, 𝑵𝑷𝑽 > 𝟎, 𝒂𝒏𝒅 𝑰𝑹𝑹 > 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒄𝒂𝒑𝒊𝒕𝒂𝒍
D) 𝑃𝐼 < 1, 𝑁𝑃𝑉 < 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 < 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
You are planning to rent a flat for R13 500 per month, paid in advance. The agency
requires you to pay the present value of the first year’s monthly payments, in advance, in
a lump sum. An interest rate of 12,35% per year, compounded monthly, is applicable.
What is the lump sum that you must pay at the beginning of the contract for the first
year’s rent?
𝑆𝑒𝑡 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑜𝑟 𝑡𝑜 𝐵𝐸𝐺𝐼𝑁𝑁𝐼𝑁𝐺 𝑀𝑜𝑑𝑒
𝑃/𝑌𝑅 = 12; 𝑃𝑀𝑇 = 13 500; 𝐼/𝑌𝑅 = 12,35; 𝑁 = 1; 𝑃𝑉?
A) R153 224, 79
B) R171 491, 86
C) R162 000, 00
D) R151 663, 91

Page 19
Tlou invests in a retirement annuity with yearly payments of R2 100 and an applicable
interest rate of 11% per year. The annuity matures in 25 years’ time. If he decides after
his first payment to increase his payment by R400 annually, then the total amount
available to him when he retires equals…
𝑅 = 2 100; 𝑄 = 400; 𝑖 = 11%; 𝑛 = 25
𝑸 (𝟏 + 𝒊)𝒏 − 𝟏 𝒏𝑸
𝑺 = [𝑹 + ] [ ]−
𝒊 𝒊 𝒊
400 (1 + 0,11)25 − 1 25(400)

𝑆 = [2 100 + ][ ]− = 𝑹𝟓𝟔𝟓 𝟒𝟎𝟕, 𝟐𝟒
0,11 0,11 0,11
A) R656 316, 34
B) R665 407, 24
C) R565 407, 24
D) R556 316, 34

Page 20
Consider Stock QRS
Coupon rate: 10,9% per year
Yield to maturity: 8,7% per year
Settlement date: 12 Aug 2022
Maturity date: 8 March 2052
What is the value of 𝑛 the number of half years from next coupon until maturity?
A) 60
B) 59
C) 58
D) 61

Page 21
If the yield to maturity is less than the coupon rate of a bond, then the all in price is greater
than R100%. In this case we say that we purchase the bond at……..
A) Discount
B) Premium
C) Face value
D) Par
Sheena has individual retirement plan. Her money is invested into a money market fund
that pays interest daily. Over a two-year period in which no deposits or withdrawals were
made, the balance of her account grew from R4 500 to R5 268, 24. The effective interest
rate over this period equals
𝐹𝑖𝑟𝑠𝑡 𝑓𝑖𝑛𝑑 𝑡ℎ𝑒 𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒
𝑃/𝑌𝑅 = 365; 𝑃𝑉 = 4 500; 𝐹𝑉 = 5 268,24; 𝑁 = 2; 𝐼/𝑌𝑅 =?
𝐼/𝑌𝑅 = 7,881798082
𝑁𝑒𝑥𝑡 𝑓𝑖𝑛𝑑 𝑡ℎ𝑒 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒
𝒋𝒎 𝒎 7,881798 365
𝒋𝒆𝒇𝒇 = 𝟏𝟎𝟎 ((𝟏 + ) − 𝟏) = 100 ((1 + ) − 1) = 8,1998 ≈ 8,20%
𝒎 365
𝐴𝑙𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑣𝑒𝑙𝑦, 𝑢𝑠𝑒 𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑜𝑟
A) 5,80%
B) 8,53%
C) 6,10%
D) 8,20%

Page 22
Consider Bond CCC
Coupon rate: 10,5%
Yield to maturity: 7,955% per year
Settlement date: 8 November 2021
Maturity date: 29 May 2051
What is the approximate accrued interest?
𝐻−𝑅 184 − 21
𝐴𝑐𝑐𝑟𝑢𝑒𝑑 = ×𝑐 = × 10,5 = 𝑹𝟒, 𝟔𝟖𝟗𝟎𝟒𝟏𝟎𝟗𝟔%
365 365
A) R0,60411%
B) R0,45768%
C) R0,30205%
D)-R6,35178%

Page 23

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ROYAL ACADEMY TUTORS

Empowering you to conquer your world

Month Outstanding principal Interest due at Payment Principle Outstanding

The applicable yearly interest rate is

Providing World Class Tuition Fit for Kings & Queens

𝑆 = 4 500; 𝑃 = 4 317,26; 𝑟 = 15%; 𝑡 =?

Providing World Class Tuition Fit for Kings & Queens

Month Outstanding Interest due Payment Principal repaid Outstanding

𝐴 = 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑑𝑢𝑒 + 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑

𝐵 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑 = 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 − 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑑𝑢𝑒

𝐶 = 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑡 𝑚𝑜𝑛𝑡ℎ 𝑒𝑛𝑑

= 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑡 𝑚𝑜𝑛𝑡ℎ 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 − 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑖𝑑

The value of B equals

Providing World Class Tuition Fit for Kings & Queens

Loan amount in R100 000s Number of loans approved

𝑎 = 22,6; 𝑏 = −1,9; 𝑟 = −0,69845

𝑦 = 22,6 − 1,9(7) = 9,3 ≈ 9

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

The graph above represents ……… between variable x and y.

A) Perfect positive linear correlation

B) Perfect negative linear correction

C) Positive linear correlation

Providing World Class Tuition Fit for Kings & Queens

∑ 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 = ∑ 𝑂𝑏𝑙𝑖𝑔𝑎𝑡𝑖𝑜𝑛𝑠 (𝑎𝑡 (𝑎𝑡 𝑌𝑒𝑎𝑟 8)

12,6% 4×4 12,6% 8×4

2𝑋 = 2(444 391,83) = 𝑅888 783,67

Providing World Class Tuition Fit for Kings & Queens

𝑃/𝑌𝑅 = 12; 𝑃𝑀𝑇 = 10 437,26; 𝐼/𝑌𝑅 = 13,25; 𝑁 = 20 𝑦𝑟𝑠; 𝑃𝑉 =?

𝑡ℎ𝑎𝑡 𝑖𝑠 35% 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒

Providing World Class Tuition Fit for Kings & Queens

A businessman buys R100 000 of equipment on the following terms:

𝐹𝑉 𝑎𝑓𝑡𝑒𝑟 2 𝑦𝑟𝑠 𝑎𝑡 12% 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦 𝑖𝑠 𝑅126 247,70

𝑷𝑴𝑻 = 𝑹𝟏𝟕 𝟏𝟓𝟑, 𝟎𝟐

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

An amount of money accumulates to R45 946 at a continuous compounding rate of 8%

Providing World Class Tuition Fit for Kings & Queens

Subject Learners marks Learners marks Learners marks

𝑇ℎ𝑒 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑚𝑎𝑟𝑘 𝑠ℎ𝑜𝑢𝑙𝑑 𝑏𝑒 ℎ𝑖𝑔ℎ𝑒𝑟 𝑎𝑛𝑑 𝑐𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝑖𝑠 𝑠ℎ𝑜𝑤𝑛 𝑖𝑛 𝑎 𝑙𝑜𝑤𝑒𝑟 𝑆𝐷

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

The following is the price equation for Bond GWM:

The yearly yield to maturity equals……

𝐺𝑟𝑜𝑢𝑝 𝑡ℎ𝑒 𝑃𝑉𝑠 𝑜𝑛 𝑜𝑛𝑒 𝑠𝑖𝑑𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑒𝑞𝑢𝑎𝑡𝑖𝑜𝑛 𝑎𝑛𝑑 𝑠𝑖𝑚𝑝𝑙𝑖𝑓𝑦

𝑇ℎ𝑖𝑠 𝑖𝑠 𝑎𝑛 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑎𝑛𝑛𝑢𝑖𝑡𝑦 𝑤𝑖𝑡ℎ 𝑡ℎ𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 (ℎ𝑎𝑙𝑓 − 𝑦𝑒𝑎𝑟𝑙𝑦) 𝑢𝑛𝑘𝑛𝑜𝑤𝑛

𝑃/𝑌𝑅 = 1; 𝑃𝑉 = 64,70882; 𝑃𝑀𝑇 = 7,5; 𝑁 = 15; 𝐼/𝑌𝑅 =? (ℎ𝑎𝑙𝑓 𝑦𝑒𝑎𝑟𝑙𝑦)

𝑌𝑒𝑎𝑟𝑙𝑦 𝑌𝑇𝑀 = 7,87 × 2 = 𝟏𝟓, 𝟕𝟒%

𝑁𝑃𝑉 = 𝑃𝑉𝑖𝑛 − 𝐼𝑜𝑢𝑡

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

Providing World Class Tuition Fit for Kings & Queens

A) 𝑃𝐼 > 1, 𝑁𝑃𝑉 > 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 < 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙

B) 𝑃𝐼 < 1, 𝑁𝑃𝑉 < 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 > 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙

C) 𝑷𝑰 > 𝟏, 𝑵𝑷𝑽 > 𝟎, 𝒂𝒏𝒅 𝑰𝑹𝑹 > 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒄𝒂𝒑𝒊𝒕𝒂𝒍

D) 𝑃𝐼 < 1, 𝑁𝑃𝑉 < 0, 𝑎𝑛𝑑 𝐼𝑅𝑅 < 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙

𝑆𝑒𝑡 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑜𝑟 𝑡𝑜 𝐵𝐸𝐺𝐼𝑁𝑁𝐼𝑁𝐺 𝑀𝑜𝑑𝑒

𝑃/𝑌𝑅 = 12; 𝑃𝑀𝑇 = 13 500; 𝐼/𝑌𝑅 = 12,35; 𝑁 = 1; 𝑃𝑉?

Providing World Class Tuition Fit for Kings & Queens

𝑅 = 2 100; 𝑄 = 400; 𝑖 = 11%; 𝑛 = 25

400 (1 + 0,11)25 − 1 25(400)

Providing World Class Tuition Fit for Kings & Queens

Consider Stock QRS