3.1 Identify the form of ownership which is applicable to each of the following statements below - NSC Business Studies - Question 3 - 2017 - Paper 1

This scenario describes a Public Company. A public company can raise capital by selling shares to members of the public through the stock exchange.

The type of ownership indicated here is a Non-profit Company. Such companies typically rely on grants and donations to support their operations.

This describes a State-owned Company. In a state-owned company, the government holds a significant portion of ownership and influences business operations.

Excess is the amount that the insured must pay towards a claim before the insurer contributes. It can be seen as a way to prevent smaller claims and reduce administrative costs for the insurer.

Premium refers to the payment made by the insured to the insurance company for providing coverage. This is usually calculated based on the value of the insured item and the level of risk involved.

Insurance is crucial for businesses as it provides financial protection against unforeseen events that could lead to losses. It enables risk management by transferring liability away from the business to the insurer. Additionally, having insurance can enhance the company's credibility with clients and partners, as it shows that the business is prepared for potential risks.

Insurance covers specific events that may occur, such as theft or fire, while assurance is a guarantee that a certain event will happen, such as death in life assurance. For example, insurance could be a property insurance policy, whereas assurance could refer to a life insurance policy.

The investment method mentioned is a Fixed Deposit, which is a savings account where the money is locked in for a specified term.

Fixed deposits are generally considered low-risk investments because they provide guaranteed returns at a fixed interest rate for the duration of the investment term. However, they are subject to inflation risk, as the purchasing power of returns may decrease over time if inflation rates exceed the interest rate earned.

Using the formula for compound interest: $A = P(1 + r/n)^{nt}$ Where:

• $P$ = principal amount (R25,000)
• $r$ = annual interest rate (0.10 for 10%)
• $n$ = number of times interest applied per time period (1 for annual)
• $t$ = number of time periods (3 years)

Calculating: $A = 25000(1 + 0.10/1)^{1*3} = 25000(1.10)^3$ $A = 25000 * 1.331 = R33,275$ Thus, Frank’s investment would grow to R33,275 at the end of three years.

Simple interest is calculated on the original principal amount only, without considering past interest. The formula for simple interest is: $I = P imes r imes t$ where $I$ is interest, $P$ is principal, $r$ is rate, and $t$ is time.

Compound interest, in contrast, is calculated on the principal amount plus any interest that has already been added. This means that the amount of interest increases each period, leading to potentially higher returns overall.