Homework Help

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

christiano-cr7's profile pic

Posted via web

dislike 1 like

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.

First part in

http://www.enotes.com/homework-help/jabu-invests-certain-sum-money-5-years-she-445482

1 Answer | Add Yours

embizze's profile pic

Posted (Answer #1)

dislike 1 like

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`

--------------------------------------------------------------

The inital deposit was R39359.14

--------------------------------------------------------------

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes