Your younger sister will start a postgraduate degree in five years’ time. She has just informed your parents that she wants to go to Namibia Business School to study a postgraduate diploma in business administration or her next best alternative of studying Economics at the International University of Management. The cost of studying a degree at the two institutions is N$18 000 per annum and each degree is four years of study.
Anticipating Jennifer’s ambitions your parents started depositing at Bank Windhoek, N$3 000 per year five years ago and will continue to do so for five more years. Bank Windhoek pays interest annually at 10% on such deposits.
a)How much more will your parents have to invest each year for the next five years to have the necessary funds for Jennifer’s education?
b) Five years have passed and Jennifer is now 18 years old and your parents have accumulated the necessary funds. Jennifer’s friends have however, convinced her to get married rather than spending time at college. Instead of her schooling, your parents have decided to pay from the investment, N$7 000 towards Jennifer’s wedding and a year later take N$15 000 for their holiday at Victoria Falls. How much money will your parents have at the end of 3 years to help you with your studies?
c) Suppose your parents had an option of investing N$20 000 in the following
|Bank Windhoek||10% per annum compounded annually|
|FNB Namibia||8% per annum compounded monthly.|
|Rose Bank||7% per annum compounded bi-annually|
Determine by means of appropriate calculations in which bank you would advise them to deposit their money?
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