Question

How much money must stemmer invest if he wants to buy a bicycle in cash after 5 years? The bank offers him an interest rate of 8.8% compounded yearly. He needs R6600 at the end of the period to buy the bicycle.

Answer 1

4,329

Explanation:

The computation of the amount invested is shown below:

As we know that

Present value = Future value ÷ (1 + interest rate)^years

= 6600 ÷ (1 + 0.088)^5

= 6600 ÷ 1.088^5

= 4,329