QUESTION 1 (25 MARKS)
1.1 What is amortization?
[2]
1.2 An investor wishes to purchase a level annuity of NS 120 per annum payable quarterly in
arrear for five years. Find the purchase price, given that it is calculated on the basis of an
interest rate of 12% per annum
(a) Effective
[4]
(b) Convertible quarterly
[5]
1.3 Anita borrows an amount of N$10, 000 and agrees to pay back this amount in 60 level
monthly payments starting one month after the loan is signed. If money is worth
J12 = 0.06,
1.3.1 compute the amount of interest Anita pays back
[3]
1.3.2 evaluate the outstanding balance after 4 years
[6]
QUESTION 2 (25 MARKS)
2.1 Mr Kandji has purchased a farm worth N$50,000 through the bank. He has decided to pay
back the loan in yearly instalments over 5 years in arrears. If money is worth 8% p.a, Schedule
these payments on an amortization table
[12]
2.1.1 Use a,j to prove that after a third (3) payment the Loan balance is NS 22,331.51 = [5]
2.2 Given that i = 0.08, find the values of i722), d4, and 6.
[8]
QUESTION 3 (25 MARKS)
3.1 Explain/define the following:
3.1.1 Sinking Funds
[4]
3.1.2 Annuity
[2]
3.1.3 Deferred annuity
[3]