document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=918555>Question 918555</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Hi, please can i get some help with this.\r<BR>\n" );
document.write( "\n" );
document.write( "On 1 January 2008, Bob Jones received a lump sum of R200 000. He invested the full amount in a fixed deposit paying interest at 7% Per annum, compounded monthly. the maturity date of this investment is 31 December 2010. the following annual inflation rates have been predicted for the given calender years: 2008 - 8.3%, 2009 - 8.5%, 2010 - 8.7%. Bob regards the annual inflation rate as his personal required rate of return for that particular year.<BR>\n" );
document.write( "Required:<BR>\n" );
document.write( "A) Without the use of interest tables, calculate the Net Present Value of this investment.   </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #557108 by </B><A HREF=/tutors/aboutme.mpl?userid=rothauserc><B>rothauserc(4718)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=rothauserc><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=rothauserc><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=557108\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> we use the following formula,<BR>\n" );
document.write( "FV = P(1 + r/n)^tn, where P is the principal, r is rate, n is number of times compounded per year, FV is future value, therefore<BR>\n" );
document.write( "FV = 200000(1 + .07/12)^(3*12) = 246585.117495385 approx R246585.12<BR>\n" );
document.write( "inflation tells us how much our principal will be worth today vs in our case 3 years ago,<BR>\n" );
document.write( "2008 principal = 200000 - (200000*.083) = 183400<BR>\n" );
document.write( "2009 principal = 183400 - (183400*.085) = 167811<BR>\n" );
document.write( "2010 principal = 167811 - (167811*.087) = 153211.443 approx 153211.44<BR>\n" );
document.write( "now 200000 - 153211.44 = R46788.56 is how much R's we have lost to inflation<BR>\n" );
document.write( "Net Present Value of this investment = R246585.12 - R46788.56 = R199796.56\r<BR>\n" );
document.write( "\n" );
document.write( " </SPAN>\n" );
document.write( "</TD></TR></TABLE>\n" );