CREDIT MANAGEMENT 3 - (SWC) CRM33B3 FINAL ASSESSMENT OPPORTUNITY. Date of examination: 5 NOVEMBER 2015

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1 Departmet of Commercal Accoutg CREDIT MANAGEMENT 3 - (SWC) CRM33B3 FINAL ASSESSMENT OPPORTUNITY Date of examato: 5 NOVEMBER 05 Tme: 3 hours Marks: 00 Assessor: Iteral Moderator: Exteral Moderator: Fred Hemmgs Yusuf Patel Adrew Pampalls INSTRUCTIONS: Ths paper cossts of 9 pages (cludg the cover page). Formulae sheets attached Facal tables as provded or facal or scetfc calculators may be used, however all termedate steps solvg the questos must be clearly show. Where applcable, roud all calculatos to two decmal places, uless stpulated otherwse. Start each questo o a ew page. Questo Topc Marks Tme Ordary Autes/ Equvalet effectve terest rates Ordary Autes ad Smple terest Smple vs. Compoud terest rates (theory) Auty/ Balace outstadg/ Captal ad Iterest Porter s 5 Forces ad busess strategy Credt surace Credt surace mutes 8 mutes 8 mutes 8 mutes 36 mutes 45 mutes 7 mutes mutes

2 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 QUESTION (0 marks). How much moey should be set asde at the ed of each moth to accumulate to a amout of R over a perod of eghtee moths, gve that your bak offers a omal terest rate of 4% NACM (omal aual compouded mothly) arrears? (5). How much terest wll you have eared o a vestmet of R vested at a smple terest rate of 8% per aum for a perod of seve years? (5) QUESTION (0 marks). You wsh to purchase a fully automated packagg mache for busess purposes at a cost of R Your bak has agreed to a omal rate of % NACM (omal aual compouded mothly) advace. Calculate the mothly repaymets that wll extgush the loa gve that you udertake to repay the loa over a 4 moth perod. (5). Determe the effectve aual terest rate for a omal rate of % NACQ. (5) QUESTION 3 (0 marks) It s ofte sad that compoud terest s always preferable to smple terest for ay vestmet made gve that t yelds a hgher retur Rad terms of terest eared. Requred: Wth the ad of a dagram, dscuss whether the abovecaptoed statemet s true. QUESTION 4 (0 marks) 4. You borrow R from your bak for two years at a terest of % NACM. What wll your mothly repaymets be f paymet are to be made mothly arrears? (4)

3 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER Determe the followg fgures for the auty calculated 4. above: 4.. The balace outstadg after the th paymet has bee made (3) 4.. The terest porto of the 3 th paymet () 4..3 The captal porto of the 3 th paymet () QUESTION 5 (5 marks) Mama Themba s Mcrobrewery s a small maufacturer of a Afrca sorghum beer - Umqomboth ad has a well-establshed posto ad brad recogto South Afrca for ts product. Sorghum beer s a ufltered alcoholc beverage made accordg to the dfferet recpes that survved the log jourey over mllea from mother to daughter ad s deeply rooted every aspect of Afrcas' lves. Not oly s ths tradtoal Afrca beer a socal tool for much mrth the tree shades ad aroud the fres Afrca for loger tha hstory ca remember, t s also a tegral part of Afrca cultural ad relgous practces as almost every ceremoy requres tradtoal beer to show respect to acestral sprts whom the Afrcas revere. The local market for the Umqomboth s earg saturato pot ad oe opto that Mama Themba s Mcrobrewery has detfed gog forward, s to move to ew markets other eghbourg Afrca coutres to further expad ts busess vetures wth ths partcular le of product. The busess developmet team of Mama Themba s Mcrobrewery s evaluatg ths opto ad s curretly workg o proposals to sell the compay's Umqomboth eghbourg Namba, Agola ad Botswaa. Oe possble strategy to acheve market etry to these coutres that the team s vestgatg s through jot vetures wth smlar compaes that are already establshed those eghbourg coutres the brewery ad assocated dstrbuto busesses. Mama Themba s Mcrobrewery s CEO has gve the busess developmet team the task of udertakg a feasblty study to explore the vablty of the proposed strategy of expaso to eghbourg coutres. As part of the feasblty study there eeds to be some assessmet of dustry competto ad the attractveess of the markets the eghbourg coutres cocered. Requred: Advse Mama Themba s Mcrobrewery s busess developmet team o how Porter's fve forces model could be used to assess dustry competto to ts proposed Umqomboth Afrca sorghum beer veture eghbourg Afrca coutres. 3

4 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 QUESTION 6 (0 marks) 6. Dscuss the two ma areas of rsk that are covered by domestc credt surace polces. (0) 6. Dscuss the mportat basc prcples of domestc credt surace. (0) QUESTION 7 (5 marks) Dscuss the ma factors that a credt surer takes to cosderato whe determg a approprate premum rate for the sured. 4

5 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 5 Formula Sheet: Smple Iterest Compoud Iterest Ordary Autes Autes Due I.... l l l I ) (

6 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 Table : Future value of R at the ed of perods % % 3% 4% 5% 6% 7% 8% 9% 0% % % 3% 4% 5% 0%

7 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 Table : Preset value of R at the ed of perods % % 3% 4% 5% 6% 7% 8% 9% 0% % % 3% 4% 5% 0%

8 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 Table 3: Future value of a auty of R per perod for perods % % 3% 4% 5% 6% 7% 8% 9% 0% % % 3% 4% 5% 0%

9 CREDIT MANAGEMENT 3B - (SWC) CRM 33B3 NOVEMBER 05 Table 4: Preset value of a auty of R per perod for perods % % 3% 4% 5% 6% 7% 8% 9% 0% % % 3% 4% 5% 0%