Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Loan question. I think I can do 1a correctly but no clue on b. p.s I got repayment for 1a) as R=127.67 Question 1 Kes

image text in transcribed

Loan question. I think I can do 1a correctly but no clue on b.

p.s I got repayment for 1a) as R=127.67

Question 1 Kes has approached a loan company with the aim of borrowing 11,000. Kes accepts that this will be repaid in level monthly instalments (in arrears) for 10 years. The loan company has agreed with Kes that a setup fee of 500 should be added to the loan amount. This additional cost represents the extra administrative work that they had to carry out in assessing her credit worthiness. This will be part of her repayments she makes to the loan company. The effective interest rate that Kes pays is 6% per annum. (a) Calculate the monthly repayment that Kes will be required to pay [4 marks) (b) After Kes has made her 2nd full year of repayments, she contacts the loan company and asks if she can reduce her repayment to half the amount calculated in (a). The loan company agrees to this change and that the interest rate she incurs is to be increased to 7% per annum effective. The company also charges an administrative fee of 100 that will be added to the loan outstanding. Calculate how long it will now take for Kes to repay the loan. [4 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Money Banking And Financial Markets

Authors: Stephen G. Cecchetti

1st Edition

0072452692, 9780072452693

More Books

Students also viewed these Finance questions

Question

What is a load fund?

Answered: 1 week ago