Question

# Q8: Oliver invested some 2 points money 5 years ago at 12% p.a. interest (compounded quarterly) and now received a payment of N$50000. How much was his initial investment?

Answer

N$23307.69

- Find the quarterly interest rate i given the annual interest rate r, where i = r/4. i = 12%/4 = 0.03.
- Calculate the number of periods n, where n = 5 years * 4 quarters per year = 20 quarters.
- Calculate the future value of the investment, FV, using the formula FV = PV * (1 + i)^n, where FV = N$50000, i = 0.03, n = 20, and PV is the unknown initial investment. FV = PV * (1 + i)^n = 50000 = PV * (1 + 0.03)^20.
- Solve for PV, PV = FV / (1 + i)^n = 50000 / (1 + 0.03)^20 = N$23307.69.