Five years ago, Mike borrowed a home loan of $500,000, repayable by equal monthly instalments over 30 years. At the time he borrowed the money, the interest rate was 3.6% per annum, compounding monthly. The general level of interest rates has been rising recently and the bank has now decided to increase the interest rate to 5.4% per annum, compounding monthly.

a) What is the original monthly repayment when interest rate is 3.6% p.a. compounding monthly? (3 marks)

b) What is the balance owing now? (3 marks)

c) If the loan term is to remain unchanged, what will be the new monthly repayment when interest rate increases to 5.4% p.a. compounding monthly? (3 marks)

d) If the monthly payment is unchanged, how many months will the loan term increase when interest rate increases to 5.4% p.a. compounding monthly? (3 marks)