Calculating the capital outstanding 12 Exercise A woman takes out a home improvement loan for P11,000 over 5 years. She makes monthly repayments in arrears and the bank charges an effective rate of interest of 6% pa. (i)What is the monthly repayment? (ii)How much interest does she pay in the third year? (iii)How much capital is repaid in the 20th instalment? (iv)At the end of the fourth year she decides to make further improvements to her house and wants to borrow another P4,000 at that stage. If her total balance is to be repaid over 3 years by level monthly payments and there is no alteration to the interest rate, how much is each payment?