1. The table below, from Standard Chartered Bank, is the monthly payment for different loan terms. Read the table carefully. Then explain how the monthly payment is determined by the annualized percentage rate. Specially, why monthly payment=S21.87 under 15.75% rate? Hint: you need to consider two things. (1) The Annualized Percentage Rate here refers to nominal rate or effective rate? (2) How is the handling fee included? Personal Instalment Loan monthly repayment table - exclusive for privileged customers Monthly repayment amount (per HK$1,000) Loan amount (Annualized Percentage Rate) Interest rate (HKS) (Monthly flat) Loan tenor 12 months 24 months 36 months 48 months 60 months $5,000 - $19,999 $88.54 0.52% $46.87 $32.98 $26.04 $21.87 (15.16%) (15.66%) (15.76%) (15.77%) (15.75%) $86.94 $45.27 $31.38 $24.44 $20,000 - $49,999 0.36% $20.27 (11.28%) (11.71%) (11.85%) (11.91%) (11.94%) $85.94 $44.27 $30.38 $23.44 $50,000 - $199,999 0.26% $1927 (8.89%) (9.26%) (9.40%) (9.48%) (9.54%) $85.34 $43.67 $29.78 $22.84 $18.67 $200,000 - 5499,999 0.20% (7.47%) (7.80%) (7.94%) (8.02%) (8.08%) $84.94 $500,000 - $1,200,000 0.16% $43.27 $29.38 $22.44 $18.27 (6.54%) (6.83%) (6.96%) (7.04%) (7.11%) Each of the monthly repayment amounts shown in the table above includes a handling fee of 1.5% per year. The handling fee will be deducted from the final approved drawdown amount. For example, the drawdown amount of $20000 with a loan of 2 year, the handling fee is 5600, S20000*1.5%*2=$600) A similar table below is from Hang Seng. Explain why monthly payment=$294.70 under 19.77% rate? How is the handling fee included in this table? Instalment Loan Interest Rate & Monthly Repayment Table Monthly Instalment Amount (Per Loan amount of HK$10,000) Loan Amount (HK) Interest Rate (Annualised Percentage Rate) (per month flat) 12 months 18 months 24 months 36 months 48 months 5917.50 5640.10 $5,000-$14,999 $501.50 $363.40 0.75% $294.70 (19.71%) (20.05%) (20.11%) (19.99%) (19.77%) $623.80 $901.30 $485 20 $346.90 515,000-$49,999 $278.10 0.59% (15.75%) (16.06%) (16.15%) (16.13%) (16.01%) $897.30 5619.80 $481.10 $342.80 $273.90 $50,000-$199,999 0.55% (14.78%) (15.07%) (15.17%) (15.16%) (15.07% $880.10 $602.50 $463.80 $200,000-$499,999 0.38% $325.30 $256.20 (10.68%) (10 92%) (11.02%) (11.07%) (11.06%) 5867.00 5589 30 $450.50 $311.90 $242.70 $500,000 or above 0.25% (7 61%) (7.80%) (7.88%) (95%) (796%) The above monthly repayment arount and annualised percentage rate includes the handing foe by way of a further an equal to 1% per annum of the loan amount. The annualised percentage rates Calculated using the Net Present Value Method in accordance with the Code of Banking Practice
