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Calculations relating to the Time Value of Money
In small groups or individually as per your facilitator’s instructions, complete the following:
6.1 Imagine yourself wanting to retire to a luxury golf estate at age 60. You expect that you will need R65 000 per month to live comfortably. You could expect to live until age 85; i.e. 25 years after retirement. You expect to get a 5% return on your money.
How much money do you need at age 60 to be able to meet your goal?
Use the factor in your Learner Guide:
(1/i) – [1/(i X (1 + i)n)]
(1/.05) – [1/(.05 X (1 + .05)25)]
20 – [1/(.05 X 3.3863549]
20 – [1/.1693177]
20 – 5.9060554
6.2 You have R50 000 in a safe. With inflation at 6%, approximately how long will it take for your money to lose half its value?
6.3 A 25-year-old employee earns R12 000 per month. How much must she be earning at age 60 to maintain the same standard of living if the average rate of inflation is 6%?
This response will be reviewed and graded after submission.