Banabas must pay his ex-wife an amount of R350 000 in two years’ time. Calculate the amount that he must invest today to have this amount available, assuming that Bank X offered him an in interest rate of 8.15% per annum compounded monthly.

He must invest R297 521 today.

Step-by-step explanation:

The compound interest formula is given by:

Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.

Banabas must pay his ex-wife an amount of R350 000 in two years’ time.

This means that

Interest rate of 8.15% per annum compounded monthly:

This means that .

Amount he must invest today:

This is P. So

He must invest R297 521 today.

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