Part C: Debt (word limit: 300 words)

Comment on your attitude towards having personal debt. In this Paper we learned that having a mortgage can be considered a smart debt.

Answer only ONE of the two options:

Option 1 (Choose this option if you have debt):

1. Refer to Part B and identify the debts you have, including your percentage of dumb vs smart debt.
2. State how you are currently paying this off and its characteristics (including interest rate, term and whether you are making the minimum repayment or additional repayments).
3. Given your calculations in previous part, specify when you can fully pay off your debt.
4. What changes can you make to pay off your debt sooner? Clearly demonstrate using relevant figures.

(Show all calculations in Appendix 3. Discussions should be presented in the space indicated below).

Option 2 (Choose this option if you currently have no debt):

If you have no debt, assume that you are planning to take a mortgage to buy a house in 5 years.

1. State an estimated price of a house that you will buy in 5 years and the amount of mortgage (80% of house price) you plan to take on. [Note: If this timeframe is not realistic for you, specify a timeframe that is more realistic for you. Explicitly state any assumption on your future salaries. Explain why your estimated salaries are realistic.]
2. Assuming that you can get a mortgage interest rate of 2.5% fixed rate per annum for 30 years, calculate the periodic repayment required for your mortgage if you repay this loan every fortnightly.
3. Comment if the above arrangement would be feasible for you. In reference to Parts (i) and (ii) above, what changes (in terms of time period to buying the house, house price, and loan period) would you make to better suit your personal financial position? Briefly explain. Include in your discussion how you intend to save up the 20% for the deposit.

(Show all calculations in Appendix 3. Discussions should be presented in the space indicated below).