- On his first birthday, baby Kevin’s granny pays R500 into a bank account for him. On every subsequent birthday until he turns eighteen, she does the same. If we assume that the rate of interest stayed at 10% during these 17 years, and the interest is calculated at the end of each year on the money in the bank, and then added to the investment, we can calculate the value of his investment. On his second birthday this happens:
- R500 (the first payment) + R50 (the interest) + R500 (the second payment) = R1 050 is the new amount in the bank.
- A year later (three years old): R1 050 + R105 + R500 = R1 655 in the bank.
- Then: R1 655 + R165,50 + R500 = R2320,50 et cetera: Complete the sum!
4.1 Mrs Van der Merwe, whose investments we looked at before, now inherits an amount of R95 000. She invests this, this time at an interest rate of 11,5% per annum. The interest is again paid out to her every month. Mrs Van der Merwe also receives a monthly pension of R3 100 from the pension fund of her previous employer. What is the total amount she receives every month?
5 Cars or furniture are often bought on hire purchase. This is a special type of loan for buying large items. It is convenient, but the interest rate is high, the goods have to be insured, a large deposit is required, the repayments are high and the full amount has to be paid within a certain period or the goods can be repossessed. This kind of loan is only given to people who have a fixed job, and then the maximum loan is determined by how much you earn to be sure that you can meet the repayments. An example is when someone wants to buy a new car. She has a steady job, and she has already saved R3 800. The salesman accepts her old car, which he values at R4 100, as part of the deposit. To buy a car costing R70 800,00 she will have to pay about R1 800 per month for 54 months before the car is her property.
5.1 What is the total amount of money she will have paid at the end of the 54 months?
5.2 Say she gets a loan from the bank at a rate of 18%, sells her old car at R4 000 and uses this and her savings to pay the R70 800 for the new car. She pays the bank loan off at a rate of R1 800 per month. What is the total cost of the car at the end of her loan repayments?
6 You have to have money in a foreign currency when you travel overseas. If you want to visit America, you have to exchange your rand for dollars. The amount of rand you have to pay for one dollar fluctuates from day to day. It has been as low as R1,50 in the past, and recently it was R13,80. This relationship between two currencies is called the exchange rate . An American tourist in South Africa paying about R35 for a hamburger, chips and cool drink, can calculate that the meal will cost him about $3,50 if the exchange rate is R10,00 per dollar.
6.1 How many British pounds (£) will a visitor from England pay for the same meal, if the rand–pound exchange rate is 14,85?
end of CLASS WORK
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