Answer Happy

QUESTION 6 CURRENCIES, EXCHANGE RATES & INFLATION (Note: The inflation and growth rates quoted in the following case study are fictional). Rory lives in the United States On 1 September 2016, Rory invested a lump sum of $ 128 000 in a savings account with ABC Bank that earned him 4.71 % interest (compounded annually) until 30 September 2020, when the investment matured. Meghan lives in South Africa. On 1 September 2016, Meghan invested a lump sum of R 128 000 in a savings account with XYZ Bank that earned her the following returns (compounded annually) until 30 September 2020, when the investment matured: For the year ended 30 September 2016: 5.15% For the year ended 30 September 2017: 3.40% For the year ended 30 September 2018: 3.63% For the year ended 30 September 2019: 4.22% For the year ended 30 September 2020: 4.31 % During the period 1 September 2016 to 30 September 2020, the annual inflation rate in the United States was 2.43%, while the annual inflation rate in South Africa was 4 %. Required: 6.1. Calculate the value of Rory's investment as at 30 September 2020. 6.2. Calculate the value of Meghan's investment as at 30 September 2020. 6.3. Calculate the Present Value (PV) of Rory's investment as at 1 September 2016 after discounting the Future Value calculated in (a) by the annual inflation rate(s) during the investment period. 6.4. Calculate the Present Value (PV) of Meghan's investment as at 1 September 2016, after discounting the future value calculated in (b) by the annual inflation rate(s) during the investment period. 6.5. In your opinion, who has made the better investment, Rory or Meghan? Explain.