Question

Assume that simple interest is used for all calculations in this exercise. Mpho invests R8 000 in an account that offers an interest rate of 9% p.a. Calculate.

a.)The amount he will have after 8 years.
b.)The interest received after each year.
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Answer 1

a) To calculate the amount Mpho will have after 8 years, we can use the formula for calculating simple interest:

A = P(1 + rt)

Where:

A = Total amount after the given time period

P = Principal amount (initial investment)

r = Interest rate per year (as a decimal)

t = Time period in years

Given:

P = R8,000

r = 9% p.a. = 0.09

t = 8 years

Substituting the given values into the formula, we have:

A = 8,000(1 + 0.09 * 8)

A = 8,000(1 + 0.72)

A = 8,000(1.72)

A = R13,760

Therefore, Mpho will have R13,760 after 8 years.

b) To calculate the interest received after each year, we can subtract the initial investment from the total amount for each year.

Year 1:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 2:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 3:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 4:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 5:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 6:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 7:

Interest = A - P = R13,760 - R8,000 = R5,760

Year 8:

Interest = A - P = R13,760 - R8,000 = R5,760

Therefore, the interest received after each year will be R5,760.