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Jabu invests a certain sum of money for 5 years. She receives interest of 12% per annum...

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christiano-cr7 | Salutatorian

Posted July 30, 2013 at 5:29 AM via web

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Jabu invests a certain sum of money for 5 years. She receives interest of 12% per annum compounded monthly for the first two years. The interest rate changes to 14% per annum compounded semi-annually for the remaining term. The money grows to R75 000 at the end of the 5-year period.

Calculate how much money Jabu invested initially.

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embizze | High School Teacher | (Level 1) Educator Emeritus

Posted July 30, 2013 at 5:36 AM (Answer #1)

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Let x represent the initial deposit.

The money is deposited at 12% annual interst, compounded monthly, for 2 years.

The amount after 2 years is `x(1+.12/12)^24`

** Here we use `A=P(1+r/n)^(nt)` where A is the amount of money after t years,P is the principle (initial deposit), r is the annual interest rate, n is the number of compounding periods per year. **

Now this money is deposited at 14% annual interest rate, compounded semiannually, for 3 years.

`x(1+.12/12)^24(1+.14/2)^6=39359.14`

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The inital deposit was R39359.14

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