7. Calculate the annual purchasing power over the term of a 5-year loan of provided to Shane Kavanagh, a 37-year old bricklayer. The interest-only loan of $80,000 requiring annual repayments in arrears was made by the Beneficial Finance Agency on a variable interest rate basis. The variable interest rate over the loan term was as follows:

Details Year 1 Year 2 Year 3 Year 4 Year 5

Interest rate 7% 8% 8.5% 9.2% 9%

Other details over this period are shown below:

Details Year 1 Year 2 Year 3 Year 4 Year 5

Inflows:

Salary $65,000 $75,000 $82,000 $88,000 $90,000

Investments $5,000 $10,000 $12,000 $11,000 $78,000

Outflows:

Taxation $ 8,000 $10,000 $14,000 $16,000 $15,000