Grade 12

Mathematics

Maths and Science Infinity

CAPS Syllabus
Financial Mathematics

Felix Pagona Asitandile Yanxa Thulani Mjikwa

Senior Facilitator Lead Facilitator Senior Facilitator

 FINANCIAL MATHEMATICS FORMULAE
DESRCIPTION FORMULA
SIMPLE INTEREST (STRAIGHT LINE 𝐀 = 𝐏(𝟏 + 𝒊𝒏)
METHOD)

INTEREST EARNED ON SIMPLE INTEREST 𝑺𝑰 = 𝑨 − 𝑷

SIMPLE DEPRECIATION (STRAIGHT LINE 𝐀 = 𝐏(𝟏 − 𝒊𝒏)

METHOD)

COMPOUND INTEREST 𝐀 = 𝐏(𝟏 + 𝒊)𝒏

INTEREST EARNED ON COMPOUND 𝑪𝑰 = 𝑨 − 𝑷

INTEREST

COMPOUND DEPRECIATION (REDUCING 𝐀 = 𝐏(𝟏 − 𝒊)𝒏

BALANCE METHOD)

NORMAL AND EFFECTIVE INTEREST RATES 𝒊𝒏𝒐𝒎 𝒎

𝟏 + 𝒊𝒆𝒇𝒇 = (𝟏 + )
𝒎

FUTURE VALUE 𝒙[(𝟏 + 𝒊)𝒏 − 𝟏]

𝑭=
𝒊

SINKING FUND 𝑺𝒊𝒏𝒌𝒊𝒏𝒈 𝒇𝒖𝒏𝒅 = 𝑪𝑷 − 𝑺𝑽

 CP: cost price
 SV: scrap value
INTEREST EARNED ON FUTURE VALUE 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒆𝒅 = 𝑭 − (𝒙 × 𝒏)

PRESENT VALUE 𝒙[𝟏 − (𝟏 + 𝒊)−𝒏 ]

𝑷=
𝒊

INTEREST PAID ON PRESENT VALUE 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒑𝒂𝒊𝒅 = (𝒙 × 𝒏) − 𝑷

OUSTANDING BALANCE ON PRESENT 𝒙[𝟏 − (𝟏 + 𝒊)−𝒏 ]

VALUE 𝑶𝑩 =
𝒊
𝒏 = payments still to be made

𝒙[(𝟏 + 𝒊)𝒏 − 𝟏]
𝑶𝑩 = 𝑷(𝟏 + 𝒊)𝒏 −
𝒊
𝒏 = payments already made

FINAL PAYMENT ON PRESENT VALUE 𝑭𝑷 = 𝑶𝑩(𝟏 + 𝒊)𝟏

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 TUTORIAL 1
Activity 1

Jabavu wants to invest R120 000 in five years’ time, how much must she invest if he is
guaranteed a return of 8,5%p.a. compounded monthly oh her investment?

Activity 2

Mduna purchases a car for R250 000. How much will the car be worth in five years’ time, if it
depreciates at a rate of 12,5%p.a. compounded quarterly?

Activity 3

Thozama invests R20 000 into a bank account, what interest rate would be required in order for
her money to double in 3 years’ time if the interest is compounded monthly?

Activity 4

Amanda wishes to have R25 000 in his bank account in 5 years. If the interest is compounded
monthly and she invests R13 760, what interest rate will she require to fulfil her wish?

Activity 5

Zahara invests R65 000 and sees that her investment doubled over a period of 5 years. Calculate
the annual interest rate (correct to one decimal place) in the interest is compounded quarterly.

Activity 6

If R5 000 is invested for 10 years at 7,5%p.a. compounded quarterly, what simple interest rate
would have to be used to obtain result (give your answer correct to two decimal places).

Activity 7

If a car costing R85 000 depreciates at a rate of 12%p.a. for 3 years using a straight line method,
what the depreciation rate be using a reducing balance method?

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 TUTORIAL 2
Activity 1
Palesa invests R90 000 into a savings account that offers an interest rate of 6,5%p.a.
compounded monthly. After 3 years the interest rate changes to 7%p.a. compounded quarterly.
Calculate how much she will have in her account after 7 years.

Activity 2
Sanelise invested R10 000 into a savings account. The interest rate for the first two years was
8%p.a. compounded monthly. Thereafter, it changed to 11,5%p.a. compounded bi-annually.
After the first year, she also deposited an additional R500 into the account and another R1 000
after 5 years. How much did she have in her account after 6 years?

Activity 3
During school holidays, Lwandiswa worked as a waitress. She deposited all her earnings into the
Unit Trust Funds that earned a return of 10%p.a. compounded monthly. After 6 years, she makes
an additional deposit of R5 000. If Lwandiswa has R20 000 after 10 years, determine the amount
that she originally invested.

Activity 4
Jama picked four correct numbers in the National Lottery and deposited all his winnings into a
savings account offering an interest rate of 12%p.a. compounded monthly. After 2 years, he
deposited and additional R8 000 into the account. Jama then withdrew R1 000 two years later for
a family holiday. If Jama had R30 000 eight years after opening the account, how much did Jama
win in the Lottery?

Activity 5
Mantakaza buys a new car and agrees to it in full in three years’ time with a once-off payment of
R300 000. If the interest rate is 18%p.a. compounded semi-annually, calculate the purchase price
of his car.

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 TUTORIAL 3

Activity 1

1.1 Payments of R3 000 are spaced at monthly intervals, starting at 𝑇0 and ending at 𝑇30 .
The interest rate is 9% per annum compounded monthly.
1.1.1 Calculate the number of payments in the annuity.
1.1.2 How many months are there between the first and last payment?
1.1.3 How many months are there between the third and last payment?
1.1.4 Calculate the future value of the annuity once the last payment has been made at T30 .

Activity 2

Payments of R8 000 are spaced at monthly intervals, starting at T4 and ending at T50 . The interest
rate is 10% per annum compounded monthly

2.1 How many payments are there in the annuity?

2.2 How many months are there between the first and last payment?

2.3 Calculate the future value of the annuity once the last payment has been.

Activity 3

Payments of R7 500 are spaced at monthly intervals, starting at T2 and ending at T42 . The interest
rate is 15% per annum compounded monthly.

3.1 Calculate the future value of the annuity once the last payment has been made at T42 .

3.2 How many months are there between the last payment at T42 and the amount at T45 .

3.3 Calculate the future value (A) of the lump sum (F) after three months, if no further
payment of R7 500 is made after the last payment at T42 .

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Activity 4
Payments of R2 900 are spaced at monthly intervals, starting at T0 and ending at T60 . The interest
rate is 7% per annum compounded monthly.

4.2 Calculate the number of payments in the annuity.

4.2 How many months are there between the last payment at T60 and the amount (A) at T150 ?

4.3 Calculate the value of A, the accumulated amount at T150 .

TUTORIAL 4

Activity 1

1.1 Mandisa deposits R1 800 into a savings account on 31 January 2017. At the end of
each month thereafter, she deposits R1 800 into the account and continues to do this
for ten years starting from her first deposit. Interest is 12% per annum compounded
monthly. Calculate the future value of her investment at the end of the ten-year period.

Activity 2
1.2 Nana deposits R1 200 into a savings account on 31 May 2017. Interest is 12% per
annum compounded half-yearly. Six months after this, she deposits a further R1 200
into the account. Six months after this, she deposits a further R1 200 into the account.
She then continues to make half-yearly deposits of R1 200 into the account for a
period of seven years starting from her first deposit. Calculate the value of her
savings at the end of the savings period.

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Activity 3
Ayanda starts to invest money in a retirement annuity with an insurance company. At
the end of the month, she deposits R5 000 into the policy. At the end of each month
thereafter, he continues to deposit R5 000 and intends saving money for a period of ten
years starting from his first deposit. Interest is 8% per annum compounded monthly.

3.1 Calculate the future value of his investment at the end of ten-year period.

3.2 When the policy is matured, Ayanda requested the insurance company not to
pay out his investment but to rather to let the investment grow for a further two
years. Calculate the future value of his investment after the two years.

3.4 Sabatha pays R 4 200 into a savings account at the beginning of January 2011. He
continues making.

TUTORIAL 5
Activity 1
Sizwe deposits R1 200 into a savings account. At the end of each month thereafter, he
deposits R1 200 into the account and continues to do this for eight years. Interest is 6%p.a.
compounded monthly. Calculate the future value of his investment at the end of the eight-year
period.

Activity 2
Mrs Kota deposits R2 200 into a savings account. At the end of each month thereafter, she
deposits R2 200 into the account and continues to do this for ten years. Interest is 6%p.a.
compounded monthly. Calculate the future value of her investment at the end of the ten-year
period.

Activity 3
Fikile Mbalula deposits R10 000 into a savings account. At the end of each year
thereafter, he deposits R10 000 into the account and continues to do this for twenty years.
Interest is 16%p.a. effective. Calculate the future value of his investment at the
end of the twenty-year period.

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Activity 4
Lungile Mabandla, a mineworker decided to start saving money for a period of twelve years
starting from 31st December 2019. At the end of January 2020 (in one month’s time), he
deposited R3 000 into the savings account. Thereafter, she continued making deposits of R3 000
at the end of each month for the planned twelve-year period. The interest rate remained fixed at
10%p.a. compounded monthly. How much will he have saved at the end of his twelve-year plan
which started on the 31st December 2019.

Activity 5
Nomthunzi deposits R1 200 into an account paying 12%p.a. compounded semi-annually. Six
months later, she deposits R1 200 into the account. Six months after this, she deposits a further
R1 200 into the account. She then continues to make semi-annual deposits of R1 200 for a period
of seven years from her first deposit of R1 200. Calculate the value of her investment at the end
of the savings period.

TUTORIAL 6
Activity 1
Mabhuti decides to start saving for a car. On his 15th birthday, he deposits R6 000 into a bank
account with an interest rate of 8%p.a. compounded quarterly. He continues to make
quarterly payments until the last payment on his 24th birthday. How much money will he
have saved by then to finance the purchase of the car.

Activity 2
Zenande wants to save up R400 000 in five years’ time in order to purchase a new car. She starts
making monthly payments into an account paying 12%p.a. compounded monthly, starting
immediately. How much will she pay each month?

Activity 3
Nangamso decides to invest money into the share market in order to become a millionaire in
twenty years’ time. She manages to secure an interest rate of 24%p.a. compounded monthly. In
one month’s time, she starts making monthly payments into a share market account. How much
must she invest per month in order to obtain R1 000 000 at the end of the twenty-year savings
plan.

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Activity 4
Nomhle pays R3 000 into an eight-year savings account at the end of each month starting three
months after her decision to start saving. The interest rate is 18%p.a. compounded monthly. If
the investment period, starting from her decision to start saving, is eight years, calculate the
investment at the end of the eighth year.

TUTORIAL 7
Activity 1
Aphiwe starts savings in a Unit Trust Fund. He immediately deposits R900 into the fund.
Thereafter, at the end of each month, he deposits R900 into the fund and continues to do this
for five years. Interest rate is 18%p.a. compounded monthly.

1.1. Calculate the future value of his investment at the end of five years.
1.2 Aphiwe leaves his money in the fund to grow for two years without making
any further payments of R900. The interest rate changes to 10%p.a. compounded
quarterly. Calculate the value of his investment after the two-year period.

Activity 2
In order to supplement her pension after retirement, Babalwa (aged 20) takes out a retirement
annuity. She makes monthly payments of R2 000 into the fund and the payments start
immediately. The payments are made in advance, which means that the last payment of
R2 000 is made one month before the annuity pays out. The interest rate for the annuity is
15%p.a. compounded monthly. Calculate the future value of the annuity when she turns 60.

Activity 3
Andile deposits R1 700 into a savings account. At the end of each month thereafter, he
deposits R1 700 into the account and continues to do this for ten years. Interest rate is 8%p.a.
compounded monthly.

3.1 Calculate the future value of his investment at the end of a ten-year period.
3.2 Andile leaves the accumulated amount in the account for a further six months
without making any further payments R1 700. If the interest rate changes to 10%p.a.
compounded half-yearly, calculate the value of the investment after the further six
months.

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 TUTORIAL 8
Activity 1
Pretty starts a five-year savings plan. At the beginning of the beginning of the month she
deposited R2 000 into the account and makes a further deposit of R2 000 at the end of that
month. She then continues to make month end payments of R2 000 into the account for a
five-year period (starting from her first deposit). The interest rate is 6%p.a. compounded
monthly.

1.1 Calculate the value of her investment at the end of five-year period.
1.2 Due to financial difficulty, Pretty misses the last two payments of R2 000.
What will her investment be at the end of a five-year period?

Activity 2
R500 is invested each month, starting in one month’s time, into an account paying 16%p.a.
compounded monthly. The fund accumulates to R10 000. How many payments of R500 will
be made?

Activity 3
R1 000 is invested every three months, starting in three months’ time, into an account
paying 14%p.a. compounded quarterly. The fund accumulates to R25 000. How many
payments of R1 000 will be made?

Activity 4
R2 000 is immediately deposited into a savings account. Six months later and every six
months thereafter, R2 000 is deposited into the account. The interest rate is 16%p.a.
compounded half-yearly. The future value of the savings is R100 000. How many payments
of R2 000 will be made?

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 TUTORIAL 9
Activity 1

The Maths & Science Infinity (MSI) company purchases a photocopying machine for R200 000.
The photocopying machine depreciates in value at 20% per annum on reducing balance. The
company wants to buy a new machine in five years’ time. A new machine will cost much more
in the future and its cost will escalate at 16%p.a. effective. The old machine will be sold at scrap
value after five years.

A sinking fund is set up immediately in order to save up for a new machine. The proceeds from
sale of the old machine will be used together with sinking fund to buy the new machine. MSI
will pay equal monthly amounts into the sinking fund and the interest earned is 18%p.a.
compounded monthly. The first payment will be made immediately and the last payment will be
made at the end of the five-year period.

1.1 Determine the scrap value of the old machine.

1.2 Determine the cost of the new machine in five years’ time.

1.3 What is the amount in the sinking fund in five years’ time?

1.4 Calculate the monthly payment made into sinking fund.

1.5 Suppose that MSI decides to service the machine at the end of each year for the five-year
period. R3 000 will be withdrawn from the sinking fund at the end of each year starting
one year after the original machine was bought.

(a) Calculate the reduced value of the sinking fund at the end of the five-year period due
to these withdrawals.
(b) Calculate the increased monthly instalment into the sinking fund which will yield the
original sinking fund as well as allow for withdrawals from the fund for the services.

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Activity 2

A car wash business purchases large washing equipment for R140 000. The cost of the new
equipment is expected to rise by 18%p.a. while the rate of depreciation is 20%p.a. on a reducing-
balance. The life span of the equipment is 6 years.

2.1 Determine the scrap value of the original equipment.

2.2 Determine the cost of the new equipment in 6 years’ time.

2.3 Calculate the value of the sinking fund that will be required to purchase the new
equipment in 6 years’ time, if the proceeds from the sale of the old equipment (the scrap
value) will be used.

2.4 The business sets up a sinking fund to pay for the new equipment. Payments are to be
into an account paying 13,2%p.a. compounded monthly. Find the monthly payments, if
they are to commence one month after the purchase of the old equipment and cease at the
end of the 6-year period.

2.5 Suppose that the business decides to service the equipment at the end of each year for the
6-year period. R4 000 will be withdrawn from the sinking fund at the end of each year
starting one year after the original machine was bought.

2.5.1 Calculate the reduced value of the sinking fund at the end of
the 6-year period due to these withdrawals.

2.5.2 Calculate the increased monthly payment into the sinking

fund which will yield the original sinking fund amount as
well as allow for withdrawals from the fund for the services.

Exercise 3

Due to load shedding, a restaurant buys a large generator for R227 851. It depreciates at 23% per
annum on a reducing-balance. A new generator is expected to appreciate in value at a rate of
17% per annum. A new generator will be purchased in five years’ time.

3.1 Find the scrap value of the old generator in five years’ time.

3.2 Find the cost of a new machine in five years’ time.

3.3 The restaurant will use the money received from the sale of the old machine (at scrap
value) as part payment for the new one. The rest of the money will come from a sinking

12
 fund that was set up when the old generator was bought. Monthly payments, which
started one month after the purchase of the old generator, have been paid into a
sinking fund account paying 11,4% per annum compounded monthly. The payments will
finish three months before the purchase of the new machine. Calculate the monthly
payments into the sinking fund that will provide the required money for the purchasing of
the new machine.

TUTORIAL 10
Activity 1
A loan of R140 000 is repaid over six years through equal monthly payments. The interest
charged on the outstanding balance of the loan is 11,4%p.a. compounded monthly. Calculate the
monthly repayment of the loan.

Activity 2
Mr Mabuza buys a house and takes out a loan 0f R1,2 million. The loan is repaid over twenty
years.
2.1 Calculate the monthly instalment if the interest charged on the loan is 10%p.a.
compounded monthly.
2.2 Calculate the outstanding balance on the loan at the end of ten years.

Activity 3
Mrs Mkhuzo buys a car and takes out a loan of R180 000. She repays the loan over five
years. The bank charges interest on a reducing balance at 12%p.a. compounded monthly.

3.1 Calculate the monthly repayments on the loan.

3.2 Mrs Mkhuzo wants to sell her car at the end of three years. Calculate how much money
she still owes on the car.

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Activity 4
Nkosinathi Mokoena buys a house for 1,8 million. He pays a 20% deposit and takes out a
loan for the balance, which he repays over 25 years. The interest charged on the loan is
9,6%p.a. compounded monthly.

4.1 Calculate the amount on the loan.

4.2 Calculate his monthly repayment.
4.3 What is the outstanding balance on the loan at the end of ten years.
4.4 Calculate the amount of interest he paid in the first ten years.

Activity 5
Shylet wishes to purchase a car that costs R192 000. She takes out a five-year loan at an
interest rate of 12%p.a. compounded monthly.

5.1 What is the monthly instalment that Shylet will have to pay on her loan?

5.2 What is the outstanding balance on the loan after Shylet makes her 45th payment?

TUTORIAL 11

Activity 1

Edmund Ncube takes out a loan to purchase that costs R700 000. However, the bank will not
grant the entire loan and she has to put down a deposit of R50 000 and take out a loan for the
remaining balance at 18%p.a. compounded monthly.

1.1 Calculate the monthly payment the Edmund needs to make in order to back the loan in
fifteen years.
1.2 If Edmund wins the lottery after ten years and wishes to pay off the loan in full, how
much have to pay?

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Activity 2

Themba applies for a loan at a bank but it is denied due to a poor credit rating. He takes out a
short loan from a micro lender at interest rate of 16%p.a. compounded monthly. He repays
the loan back by means of 72 equal monthly payments of R2169,18 each.

2.1 What was the original amount of the loan? Give your answer to the nearest rand.

2.2 What was the interest that Themba paid to the micro lender?

Activity 3
Kayakazi takes out a student loan to study at a university. When she completed her degree,
she owes a bank R76 000. She agrees to repay the student loan over six years. The bank her
charges interest at 7%p.a. compounded monthly.

3.1 Calculate her monthly payment.

3.2 How much money did Kayakazi pay in total by the time she had repaid the loan?

Activity 4
Maratina has a business that hires out heavy machinery. She takes out a loan of R4 million
from the bank to a front end loader. She agrees to repay the loan over four years through
quarterly payments, starting three months after the loan was granted. The bank charges her
interest at 11%p.a. compounded quarterly.

4.1 Calculate her quarterly payment.

4.2 Calculate the balance on the loan at the end of two years.

Activity 5
Mangcobo buys furniture for his house at a cost of R130 000. He repays 25% in cash and
takes out a personal loan from the bank to pay the balance. The bank interest at 13%p.a.
compounded monthly on a reducing balance.

5.1 Calculate how much money she must pay each month is she repays the loan over three
years.

5.2 How much did she pay for the furniture at the end of three years after the loan is repaid?

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 TUTORIAL 12
Activity 1
Ta Mthura buys a house and takes out a loan for R1 400 000. The loan is paid over twenty
years and the interest charged on the loan is 9%p.a. compounded monthly.

1.1 What is the interest paid on the loan in the first year?

1.2 What is the interest paid on the loan in the last year?

Activity 2
James buys a house and takes out a loan of R2 million. He repays the loan over fifteen years.
The interest charged on the outstanding balance of the loan is 8,5%p.a. compounded monthly.

2.1 Calculate his monthly payment on the loan.

2.2 What is the outstanding balance on the loan at the end of five years?

2.3 Determine the amount of money paid on the loan at the end of the first five years.

2.4 What is the interest paid on the loan in the first five years?

Activity 3
Kelvin takes out a loan to pay for his new car. He repays the loan by mean of monthly
payments of R3 000 for a period of six years starting one month after granting of the loan.
The interest rate is charged at 18%p.a. compounded monthly.

3.1 Calculate the price of his new car.

3.2 Calculate the balance outstanding balance after the 20th payment.

3.3 Calculate the balance outstanding balance after the 60th payment.

Activity 4
Lerato takes out a bank loan and repays the loan by means of equal quarterly payments of
R2 000, starting in three months’ time. The interest rate is 18%p.a. compounded quarterly
and the duration of the loan is ten years.

4.1 Calculate the amount that Lerato borrowed.

4.2 Calculate the balance outstanding after the 30th payment has been.

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Activity 5
Palesa takes out a loan of R120 000 for home improvements. The loan is taken over four
years at an interest rate of 12%p.a. compounded monthly.

5.1 Calculate the monthly payment, if the first payment is made one month after granting of
the loan.

5.2 Calculate the balance outstanding after the 20th payment has been.

TUTORIAL 13
Activity 1
Nomonde buys a car and takes out a loan of R110 000. The car is repaid over four years
through equal monthly instalments. The interest charged on the is 10%p.a. compounded
monthly. Calculate the monthly instalments if her instalment only starts three months after
she bought her car.

Activity 2
Dumisani takes out a loan of R600 000 from the bank. The loan must be repaid at the end of
six years from the time that the loan is drawn, but the bank offers him two choices. He can
start repaying the loan one month after taking out the loan or he could start his first
instalment six months after taking out the loan. The interest paid on the money outstanding
on the loan is calculated at 9,5%p.a. compounded monthly. Calculate how much more it
would cost him to repay the loan if he chooses the deferred payment option.

Activity 3
A loan of R150 000 is taken out at an interest rate of 7%p.a. compounded monthly. Payments
start six months after the loan is taken out and is repaid by means of 60 equal monthly
payments.

3.1 Calculate the balance outstanding five months after the loan is taken out.

3.2 Determine the monthly payment required to pay back the loan.

Activity 4
Mapaseka takes out a loan of R180 000 which is to be repaid over a five-year period. The
loan agreement allows for payments to start three months after the granting of the loan at an
interest rate of 10,5%p.a. compounded monthly.

4.1 Determine the balance outstanding of the two months after the loan is granted.

4.2 What is the monthly payment that Mapaseka has to make to pay the off in five years?

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Activity 5
A loan of R350 000 is taken out at an interest rate of 5,8%p.a. compounded monthly. The
loan is taken out the 1st of March 2011. The first payment is made on the 1st of December
2011 and the loan is repaid by 72 equal monthly payments.

5.1 What is balance outstanding on the loan on the 1st of September 2011?

5.2 Determine the monthly payment required to pay back the loan.

Activity 6
Nomhle starts her own business and takes out of R1,5 million. The loan is repaid at the end of
five years through equal quarterly instalments but the first payment is only paid in 9 months
after the loan was granted. Calculate the quarterly instalment on the loan if the interest is
calculated at 11,8%p.a. compounded quarterly.

Activity 7
Anilla takes out a loan of R1200 000 to buy his own house. The interest on the loan is 9%p.a.
compounded monthly. He plans to repay the loan in 25 years but makes an arrangement with
the bank that this first payment starts four months after taking out the loan. Calculate her
monthly payment on the loan.

Activity 8
Mjila takes out a loan of R2 million to buy a boat for fishing business. The interest on the
loan is 12%p.a. compounded quarterly and the loan must be repaid in three years through
equal quarterly payments. Calculate the quarterly payment if the first payment starts:

8.1 Three months after the loan was granted.

8.2 Nine months after the loan was granted

Activity 9
Mr Hoboyi takes out a loan of R220 000 from the bank to expand his own business. The bank
charges interest at 10,5%p.a. compounded monthly. She repays the loan three years after the
loan was drawn., but her first payment on the loan starts after 8 months.

9.1 Calculate her monthly payment.

9.2 Calculate the balance on the loan at the end of the second year.

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 TUTORIAL 14
Activity 1
A loan of R500 000 is taken out at an interest rate of 9%p.a. compounded monthly. It is
repaid by equal monthly payments of R6 000 and a final payment less than R6 000.

1.1 How many payments of R6 000 are needed to pay off the loan?

1.2 What is the outstanding balance on the loan after the last payment of R6 000?

1.3 What is the value of the final payment?

Activity 2
A loan of R750 000 is taken out at an interest rate of 12%p.a. It is
repaid by biannual payments of R55 000 and a final payment less than R55 000.

2.1 How many payments of R55 000 are needed to settle the loan?

2.2 What is the outstanding balance on the loan after the last payment of R55 000?

2.3 What is the value of the final payment?

Activity 3
A mortgage bond of R350 000 is taken out. The bond is repaid in equal monthly instalments
at the end of each month, over a period of 20 years at an interest rate of 12,5%p.a.
compounded monthly.

3.1 Determine the monthly instalments to pay back the loan in 20 years.

3.2 The loan is actually paid by paying R4 000 per month in the first four years and R5 000
per month thereafter until the loan is paid off, with the final payment less than R5 000.
Determine the outstanding balance after the first four years.

3.3 Determine the number of full R5 000 payments that have to be made.

3.4 What is the value of the final payment?

19
 GRADE 12 EXAM-TYPE QUESTIONS

TUTORIAL 1
Activity 1
1.1 R1 570 is invested at 12% p.a. compound interest. After how many years will the
investment be worth R23 000? (4)
1.2 A farmer has just bought a new tractor for R800 000. He has decided to replace the
tractor in 5 years’ time, when its trade-in value will be R200 000. The replacement
of the tractor is expected to increase by 8% per annum.
1.2.1 The farmer wants to replace his present tractor with a new one in 5 years’
time. The farmer wants pay cash for a new tractor, after trading in his
present tractor for R200 000. How much will he need to pay? (3)
1.2.2 One month after purchasing his present tractor, the farmer deposits 𝑥 rands
into an account that pays interest at arate of 12% p.a. compounded monthly.
He continued to deposit the same amount at the end of each month for a total
of 60 months.
At the end of 60 months he has exactly the amount that is needed to purchase
a new tractor, after he trades in his present tractor.
Calculate the value of 𝑥. (6)
1.2.3 Suppose that 12 months after the purchase of the present tractor and every 12
months thereafter, he withdraws R5 000 from his account, to pay for
maintainance of the tractor. If he makes such withdrawals, what will the new
montly deposit be? (4)
[17]
Activity 2
2.1 R2 000 was invested in a fund paying 𝑖% interest compounded monthly.
After 18 months the value of the fund was R2 860,00. Calculate 𝑖, the interest rate. (4)
2.2 On 31 January 2008, Farouk banked R100 in an account that paid 8% interest
per annum, compounded monthly. He continued to deposit R100 on the last day of
every month until 31 December 2008. He was hoping to have enough money on 1
January 2009 to buy a bike for R1 300. Determine whether he will be able to do so,
or not. (5)
[9]

20
Activity 3
3.1 A new cellphone was purchased for R7 200. Determine the depreciation value after
3 years if the cellphone depreciates at 25% p.a. on the reducing balance method. (3)
3.2 Jill negotiates a loan of R300 000 with a bank which has to be repaid by means of
monthly payments of R5 000 and a final payment which is less than R5 000.
The repayments start one month after the granting of the loan. Interest is fixed at
18%p.a. compounded monthly.
3.2.1 Determine the number of payments required to settle the loan. (6)
3.2.2 Calculate the balance outstanding after Jill paid the last R5 000. (5)
3.2.3 Calculate the value of the final payment made by Jill to settle the loan. (2)
3.2.4 Calculate the total amount that Jill repaid to the bank. (1)
[17]
Activity 4
4.1 At what annual percentage interest rate, compounded quarterly, should a lump sum be
invested in order for it to double in 6 years? (5)
4.2 Timothy buys furniture to the value of R10 000. He borrows the money on
1 February 2010 form a financial institution that charges interest at a rate of
9,5% p.a. compounded monthly. Timothy agrees to pay monthly instalments
of R450. The agreement of the loan allows Timothy to start paying these equal
monthly payments from 1 August 2010.
4.2.1 Calculate the total value owing to the financial institution on 1 July 2010. (2)
4.2.2 How many months will it take Timothy to pay back the loan? (4)
4.2.3 What is the balance on the loan immediately the 25th payment was made? (3)
[14]
Activity 5
5.1 R1 430,77 was invested in a fund paying 𝑖% p.a. compounded monthly.
After 18 months the fund had a value of R1 711,11. Calculate 𝑖. (4)
5.2 A father decided to buy a house for his family for R800 000. He agreed to pay
monthly instalments of R10 000 on a loan which incurred interest at a rate of 14% p.a.
compounded monthly. The first payment was made at the end of the first month.
5.2.1 Show that the loan would be paid off in 234 months. (4)
5.2.2 Suppose the father encountered unexpected expenses and was unable to any
instalments at the end of the 120th, 121st, 122nd and 123rd months. At the end of

21
 the 124th month he increased his payment so as to still pay off the loan in 234
months by 111 equal monthly instalments. Calculate the value of his new
instalment. (7)
[15]
Activity 6
6.1 How many years will it take for an article to depreciate to half of its value according
to the reducing balance method at 7% per annum? (4)
6.2 Two friends each receive an amount of R6 000 to invest for a period of 5 years.
They invest the money as follows:
Radesh: 8,5% p.a. simple interest. At the end of 5 years, Radesh will receive a
bonus of exactly 5% of the principal amount.
Thandi: 8% per annum compounded monthly.
Who will have the biggest investment after 5 years? Justify your answer with
appropriate calculations. (6)
6.3 Nicky opened a savings account with single deposit if R1 000 on 1 April 2011.
She makes 18 monthly deposits of R700 at the end of every month. Her first
payment is made on 30 April 2011 and her last payment on 30 September 2012.
The account earns interest at 15% per annum compounded monthly.
Determine the amount that should be in her savings account immediately after her
last deposit is made (that is on 30 Septwmber 2012). (6)
[16]

22
 TUTORIAL 2
Activity 1
1.1 Lerato wants to purchase a house that costs R850 000. She is required to pay a 12%
deposit and she will borrow the balanced from a bank. Calculate the amount that
Lerato must borrow from the bank. (2)
1.2 The bank charges interest at 9% per annum, compounded monthly on the loan amount.
Lerato works out that the loan will carry an effective interest rate of 9,6% p.a. Is her
calculation correct or not? Justify your answer with appropriate calculations. (4)
1.3 Lerato takes out a loan from the bank for the balance of the purchase price and agrees
to pay it back over 20 years. Her repayments start one month after the loan is granted.
Determine her monthly instalment if interest is charged at 9% p.a. compounded
monthly. (4)
1.4 Lerato can afford to repay R7 000 per month. How long will it take her to repay the
loan amount if she chooses to pay R7 000 as a repayment every month? (4)
[14]
Activity 2
2.1 A business buys a machine that costs R120 000. The value of the machine depreciates
at 9% per annum according to the diminishing-balance method.
2.1.1 Determine the scrap value of the machine at the end of 5 years. (3)
2.1.2 After 5 years, the machine needs to be replaced. During this time, inflation
remained at 7% p.a. Determine the cost of the new machine at the end of
5 years. (3)
2.1.3 The business estimates that it will need R90 000 by the end of 5 years.
A sinking fund for R90 000, into which equal monthly instalments must
be paid, is set up. Interest on this fund is 8,5% p.a. compounded monthly.
The first payment will be immediately and the last payment will be made
at the end of the 5-year period.
Calculate the value of the monthly payment into the sinking fund. (5)
2.2 Lorraine receives an amount of R900 000 upon her retirement. She invests this amount
immediately at an interest rate of 10,5% p.a. compounded montlhy. For how many
months will she be able to live from her investment? (6)
[17]

23
Activity 3
3.1 Two friends, Zizipho and Lindokuhle, each wants to invest R5 000 for four years.
Zizipho invests her money in an account that pays simple interest at 8,3% per annum. At
the end of four years, she will receive a bonus of exactly 4% of the accumulated amount.
Lindokuhle invests her money in an account that pays interest at 8,1% p.a., compounded
monthly. Two friends, Zizipho and Lindokuhle, each wants to invest R5 000 for four
years.

Zizipho invests her money in an account that pays simple interest at 8,3% per annum. At
the end of four years, she will receive a bonus of exactly 4% of the accumulated amount.
Lindokuhle invests her money in an account that pays interest at 8,1% p.a., compounded
monthly.

Whose investment will yield a better return at the end of four years? Justify
your answer with appropriate calculations. (5)

3.2 Nine years ago, a bank granted Mandisa a home loan of R525 000. This loan was
to be repaid over 20 years at an interest rate of 10% p.a., compounded monthly.
Mandsa’s monthly repayments commenced exactly one month after the loan was
granted.

3.2.1 Mandisa decided to make monthly repayments of R6 000 instead of the

required R5 066,36. How many payments will she make to settle the
loan? (5)

3.2.2 After making monthly repayments of R6 000 for nine years, Mandisa
required money to fund her daughter’s university fees. She approached
the bank for another loan. Instead, the bank advised Mandisa that the extra
amount repaid every month could be regarded as an investment and that
she could withdraw this full amount to fund her daughter’s studies.

Calculate the maximum amount that Mandisa may withdraw from the loan
account. (4)
[14]

24
Activity 4
4.1 A car depreciated at the rate of 13,5%p.a. to R250 000 over 5 years according to
the reducing balance method. Determine the original price of the car, to the
nearest rand. (3)

4.2 Melissa takes a loan of R950 000 to buy a house. The interest is 14,25% p.a.
compounded monthly. His first instalment will commence one month after taking
out the loan.

4.2.1 Calculate the monthly repayments over a period of 20 years. (4)

4.2.2 Determine the balance on the loan after the 100th instalment. (4)

4.2.3 If Melissa failed to pay the 101st, 102nd, 103rd and 104th instalments,
calculate the value of the new instalment that will settle the loan in
the same time period. (4)
[15]
Activity 5
5.1 Sizwe bought a car for R180 000. The value of the car depreciated at 15% per
annum according to the reducing-balance method. The book value of Sizwe’s
car is currently R79 866,96.

5.1.1 How many years ago did Sizwe buy the car? (3)

5.1.2 At exactly the same time that Sizwe bought the car, Anilla deposited
R49 000 into a savings account at an interest rate of 10% p.a., compounded
quarterly. Has Anil accumulated enough money in his savings account to buy
Sizwe’s car now? (3)

5.2 Exactly 10 months ago, a bank granted Jane a loan of R800 000 at an interest
rate of 10,25% p.a., compounded monthly.

 Must be repaid over 20 years

 Must be repaid by means of monthly repayments of R7 853,15 starting one
month after the loan was granted.

5.2.1 How much did Jane owe immediately after making her 6th repayment? (4)

5.2.2 Due to financial difficulties, Jane missed the 7th ,8th and 9th payments
She was able to make payments from the end of the 10th month onwards.
Calculate Jane’s increased monthly payment in order to settle the loan

25
 in the original 20 years. 5)
[15]
TUTORIAL 3
Activity 1
1.1 Nontando decided today that he will save R15 000 per quarter over the next four years.
She will make the first deposit into a saving account in three months’ time and
she will make his last deposit at the end of four years from now.

1.1.1 How much will Nontando have at the end of four years if interest is earned
at 8,8% per annum, compounded quarterly? (3)
1.1.2 If Nontando decided to withdraw R100 000 from the account at the end of
three years from now, how much will she have in the account at the end
of four years from now? (3)
1.2 Thandokazi takes out a home loan over 20 years to buy a house that costs R1 500 000.

1.2.1 Calculate the monthly instalment if interest is charged at 10,5% p.a,

compounded monthly. (4)
2.2.2 Calculate the outstanding balance immediately after the 144th payment
was made. (5)
[15]

Activity 2

2.1 A tractor costing R180 000 depreciates on the reducing balance method to
R65 000 at the end of 8 years. Determine the rate at which the tractor is
depreciating per annum. (3)

2.2 Tebogo buys a flat at the beach front for R850 000. She takes out a loan from the
bank at an interest rate of 14,25 % per annum compounded monthly. Her first
instalment will commence in one month after she has taken out the loan.

2.2.1 Calculate the monthly repayments over a period of 20 years. (4)

2.2.2 If the monthly repayment is increased by 20 % before the first payment is

being made towards the loan, determine the number of payments that will
now be made to settle the loan. (4)

2.3 Calculate the final payment to settle the loan in Exercise 2.2.2. (4)
[15]

26
Activity 3

3.1 On 30 June 2013 and at the end of each month thereafter, Asif deposited R2 500
into a bank account that pays interest at 6% per annum, compounded monthly.
He wants to continue to deposit this until 31 May 2018.

Calculate how much money Asif will have in this account immediately after
depositing R2 500 on 31 May 2018 (3)

3.2 On 1 February 2018, Genevieve took a loan of R82 000 from the bank to pay for
her studies. She will make her first repayment of R3 200 on 1 February 2019 and
continue to make payments of R3 200 on the first of each month thereafter until
she settles the loan. The bank charges interest at 15% per annum, compounded
monthly.

3.2.1 Calculate how much Genevieve will owe the bank on 1 January 2019. (3)
3.2.2 How many instalments of R3 200 must she pay? (5)
3.2.3 Calculate the final payment, to the nearest rand, Genevieve has to pay
to settle the loan. (5)
[16]

Activity 4

4.1 Olwethu invested R10 000 for 3 years at an interest rate of 𝑟% p.a, compounded
monthly. At the end of this period, she received R12 146,72. Calculate 𝑟,
correct to ONE decimal place. (5)
4.2 Phelo takes a loan from a bank to buy a car for R235 000. He agrees to repay the
loan over a period of 54 months. The first instalment will be paid one month
after the loan is granted. The bank charges interest at 11% p.a, compounded
monthly.

4.2.1 Calculate Phelo’s monthly instalment. (4)

4.2.2 Calculate the total amount of interest that Phelo will pay during the
first year of the repayment of the loan. (6)
[15]

27
Activity 5

5.1 On the 2nd day of January 2015 a company bought a new printer for R150 000.

 The value of the printer decreases by 20% annually on the reducing-balance

method.
 When the book value of the printer is R49 152, the company will replace
the printer.

5.1.1 Calculate the book value of the printer on the 2nd day of January 2017. (3)

5.1.2 At the beginning of which year will the company have to replace the
printer? Show ALL calculations. (4)

5.1.3 The cost of a similar printer will be R280 000 at the beginning of 2020.04.07
The company will use the R49 152 that it will receive from the sale of the
old printer to cover some of the costs of replacing the printer. The company
set up a sinking fund to cover the balance. The fund pays interest at 8,5%
per annum, compounded quarterly. The first deposit was made on 2 April 2015
and every three months thereafter until 2 January 2020.

Calculate the amount that should be deposited every three months to have
enough money to replace the printer on 2 January 2020. (4)

5.2 Lerato wishes to apply for a home loan. The bank charges interest at 11% per
annum, compounded monthly. She can afford a monthly instalment of R9 000
and wants to repay the loan over a period of 15 years. She will make the first
monthly repayment one month after the loan is granted.

Calculate, to the nearest thousand rand, the maximum amount that Lerato can borrow
from the bank. (5)
[16]

28
 TUTORIAL 4
Activity 1

On 1 June 2016 a bank granted Thabiso a loan of R250 000 at an interest rate of 15% p.a
compounded monthly, to buy a car. Thabiso agreed to repay the loan in monthly
instalments commencing on 1 July 2016 and ending 4 years later on 1 June 2020.
However, Thabiso was unable to make the first two instalments and only commenced
with the monthly instalments on 1 September 2016.

1.1 Calculate the amount Thabiso owed the bank on 1 August 2016, a month
before he paid his first monthly instalment. (2)

1.2 Having paid the first monthly instalment on 1 September 2016, Thabiso will still
pay his last monthly instalment on 1 June 2020. Calculate his monthly instalment. (4)

[6]

Activity 2

2.1 If a car valued at R255 000 depreciates on a reducing balance method at an

interest rate of 12,5 % p.a., calculate the book value of the car after 7 years. (3)

2.2 A loan of R10 000, taken on 1 February 2016, is to be repaid in regular fixed
instalments of R450 on the first day of each month. Interest is charged on the
loan at 9,5 % p.a. compounded monthly. The first instalment is paid on
1 August 2016.

Calculate:
2.2.1 The total amount payable on 1 July 2016. (2)

2.2.2 The number of payments that will be needed to settle the loan. (5)

2.2.3 The balance outstanding on the loan after the 25th payment has been made. (4)
[14]

29
Activity 3

3.1 Lucy Diale invests a lump sum of R5 000 in a savings account for exactly 2 years.
The investment earns interest at 10% p.a compounded quarterly.

3.1.1 What is the quarterly interest rate for Diane’s investment? (1)

3.1.2 Calculate the amount in Diane’s savings account at the end of the 2 years. (3)

3.2 Mbethe inherits R800 000. He invests all of his inheritance in a fund which earns
interest at a rate of 14% p.a. compounded monthly. At the end of each month he
withdraws R10 000 from the fund. His first withdrawal is exactly one month
after his initial investment.

3.2.1 How many withdrawals of R10 000 will Mbethe be able to make from
this fund? (5)

3.2.2 Exactly four years after his initial investment Mbethe decides to withdraw
all the remaining money in his account and to use it as a deposit towards
a house.

(a) What is the value of Mbethe’s deposit, to the nearest rand? (4)

(b) Mbethe’s deposit is exactly 30% of the purchase price of the house.
What is the purchase price of the house, to the nearest rand? (1)
[14]

Activity 4

4.1 How long will it take for a motor car to double in value if the annual inflation
rate is 8,5% ? (4)

4.2 A loan of R350 000, taken on 1 January 2005, is to be repaid in regular fixed
instalments at the end of each month. Interest was charged at 13,5% p.a.
compounded monthly for 20 years. The client made the first payment on
31 March 2005.

4.2.1 Calculate the value of the loan payable on 28 February 2005. (2)
4.2.2 Determine the monthly repayment that will settle the loan within the
20-year period. (4)
4.2.3 The client wishes to settle the loan at the end of the 180th month.

30
 Calculate the savings made as a result of settling this loan earlier. (5)
[15]

Activity 5
5.1 Nomsa started working on 1 January 1970. At the end of January 1970 and at the end of
each month thereafter, she deposited R400 into an annuity fund. She continued doing this
until she retired on 31 December 2013.

5.1.1 Determine the total amount of money that she paid into the fund. (2)

5.1.2 The interest rate on this fund was 8% p.a, compounded monthly.
Calculate the value of the fund at the time that she retired. (5)

5.1.3 On the 1 January 2014 Nomsa invested R2 million in an account paying

interest at 10% p.a compounded monthly. Nomsa withdraws a fixed amount
from this account at the end of each month, starting on 31 January 2014.
If Nomsa wishes to make monthly withdrawals from this account for 25 years,
calculate the maximum amount she could withdraw at the end of each mont. (4)

5.2 For each of the three years from 2010 to 2012 the population of town X decreased
by 8% per year and the population of town Y increased by 12% per year. At the end of
2012 the populations of these two towns were equal. Determine the ratio of the
population of town X (call it PX ) to the population of town Y (call it PY ) at the
beginning of 2010. (4)
[15]

Activity 6

6.1 Exactly five years ago Mpume bought a new car for R145 000. The current book
value of this car is R72 500. If the car depreciates by a fixed annual rate according
to the reducing – balance method, calculate the rate of depreciation. (3)

6.2 Samuel took out a home loan for R500 000 at an interest rate of 12% per annum,
compounded monthly. He plans to repay this loan over 20 years and his first
payment is made one month after the loan is granted.

6.2.1 Calculate the value of Samuel’s monthly instalment. (4)

6.2.2 Melissa took out a loan for the same amount and at the same interest rate
as Samuel. Melissa decided to pay R6 000 at the end of every month.
Calculate how many months it took for Melissa to settle the loan. (4)

6.2.3 Who pays more interest, Samuel or Melissa? Justify your answer. (2)
[13]

31
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