FIN2602 Assignment 2 2026 SEMESTER 1| Due April 2026

FIN2602 ASSIGNMENT 2 2026

DUE APRIL 2026



QUESTION 1 (Time Value of Money)



1.1 Calculate the future value of a R3000 lump sum which is invested today, and
which earns simple interest of 10% per annum, over 15 years.



Simple interest formula

A=P(1+r×t)A=P(1+r×t)

P=R3 000P=R3000

r=10%=0.10r=10%=0.10

t=15 yearst=15 years



A=3 000×(1+0.10×15)A=3000×(1+0.10×15)A=3 000×(1+1.5)A=3000×(1+1.5)A=3 000×
2.5A=3000×2.5A=R7 500A=R7500

R7,500



1.2 Amount after 1 year – R1,200 @ 12% simple interest p.a.

A=1 200×(1+0.12×1) A =1200×(1+0.12×1)A=1 200×1.12A =1200×1.12A =R1 344A=
R1344

R1,344

, 1.3 Amount after 2 years – same R1,200 @ 12% simple interest

A=1 200×(1+0.12×2)A=1200×(1+0.12×2)A=1 200×(1+0.24)A=1200×(1+0.24)A=1 200×
1.24A=1200×1.24A=R1 488A=R1488

R1,488



1.4 Future value of an annuity – R150 annually @ 12% compound interest for 15
years

Future value of ordinary annuity formula:

FVA=PMT×(1+r)n−1rFVA=PMT×r(1+r)n−1

Where:

PMT=R150PMT=R150

r=12%=0.12r=12%=0.12

n=15n=15



FVA=150×(1.12)15−10.12FVA=150×0.12(1.12)15−1

First, calculate (1.12)15(1.12)15:
Using compound interest factors from the textbook tables (Table 3.1 or calculator):

(1.12)15≈5.47356576(1.12)15≈5.47356576FVA=150×5.47356576−10.12FVA=150×0.
125.47356576−1FVA=150×4.473565760.12FVA=150×0.124.47356576
FVA=150×37.27971467FVA=150×37.27971467FVA=R5 591.96FVA=R5591.96

R5,591.96



1.5 Will R100,000 over 20 years be enough for retirement? (Inflation @ 10%)

Present value calculation to determine what R100,000 in 20 years is worth today: