Question 11.
The interest portion of first payment is
120000∗( 1.061 ¿ −1 )=1760.86
Question 11.2
( 12 )
Level monthly installments :- 1,000 = X∗a10 10 %
1000
X= =12.98
12∗6.4213
5
Capital outstanding at the start of sixth year = 1000 ( 1.10 ) −12.98∗s5∨¿ 12
@ 10 %=617.05¿
6
Capital outstanding at the end of sixth year = 1000 ( 1.10 ) −12.98∗s6∨¿ 12
@ 10 %=515.98¿
Capital repaid during the year = 617.05 – 515.98 = 101.07
Question 11.3
Annual repayment > 100,000 = X∗a10∨@ 8 % +50,000∗v −10
−10
100 ,00 0−50000∗v
Annual repayment > =X
a10∨@ 8 %
−10
10 0 ,000−50000∗1.08
Annual repayment > =X
6.710
76840
X =¿ =11,451
6.710
Question 11.4
Let X equal the amount of first 3 installments each
3
80000=X a3∨@ 4.5 % + 2 X∗a 5∨@ 4.5 %∗v
3
80000=X {a 3∨@ 4.5 % +2∗a5∨@ 4.5 %∗v }
−3
80000=X {2.74896+ 2∗4.38997∗1.045 }
80000
X=
{2.74896+2∗4.38997∗1.045−3 }
X =7,660.77
Loan outstanding one year before loan is completely repaid (i.e after 7 th year)
7660.77∗2∗v
7660.77∗2∗( 1.045−1 )=14,662
Question 11.5
Monthly installments based on APR =
4000=12∗a¿∗X ¿
4000
X=
12∗a¿ =93.922 ¿
Question 11.6
The APR rate is the annual effective rate that solves the equation of value
12∗368.75∗a2∨¿ 12
=7500i .e a2∨¿ ¿
12
=1.6949 ¿
To obtain the first guess for the APR, we can calculate the flat rate
Total Repayment−Original Loan
Flat rate=
Orignal Loan∗total term
( 368.75∗24−7500 )
Flat rate= ¿9%
7500∗2
Since APR is approximately twice of 18%, we can start our guesses from there
a ¿=1.6909 ¿
a ¿=1. 7052 ¿
Interpolating these two give 17.7%
a ¿=1.69 52 ¿
a ¿=1.69 38 ¿
Since value at 17.7% is closer , APR is 17.7
Question 11.7
Monthly payment =
50000=X∗¿
50000
X=
12∗a¿ =599.29 ¿
(ii) Interest paid in first year = Amount outstanding at the beginning – Amount
outstanding at the end
Amount at the end of the year = 12∗a¿∗599.29=46548 ¿
Capital repaid in the first year = 50000−46548.71=3451.29
Interest paid in the first year = 12∗599.29−3451.29=3740.19
Question 11.8
Amount of total loan is equal to present value of all the future installments
L=80 a1 5∨¿+20 (I a)
15∨¿¿
¿
L=80∗10.379+20∗73.667=2303.66
(ii) 5th installment must have been first payment of 100 plus 4 increases of 20 so 180,
6th installment = 200 , 7th installment of 220 and so on
Amount outstanding after 5th payment = 180∗( a1 0 ) +20 ¿ = 2177.38
Interest element of 6th payment = 0.05 * 2177.38 = 108.87
Capital element of 6th payment = 200 – 108.87 = 91.13
Capital outstanding after 6th payment = 2086.25
Interest element of 7th payment = 0.05 * 2086.25 = 104.31
Capital element of 7th payment = 220 – 104.31 = 115.69
Capital outstanding after 7th payment = 1970.56
Loan schedule will we as follows
Payment Interest element Capital Element Capital outstanding
5 2177.38
6 108.87 91.13 2086.25
7 104.21 115.69 1970.66
Question 11.9
(i) Monthly payment
250000=12∗a ¿∗x ¿
X =1586.60
(ii) Capital repaid in forth year
Capital at the end of 3rd year = 12∗1586.60∗a ¿=235,487.50¿
Capital at the end of 4th year = 12∗1586.60∗a ¿=23 0070.17 ¿
Capital repaid in 4th year = 235,487.50 - 230070.17=5417.326