Question
Please help and include the formulas used thank you! Question 1 It is Jan 20XX. You plan to purchase a $1.2 million condominium with monthly
Please help and include the formulas used thank you!
Question 1
It is Jan 20XX. You plan to purchase a $1.2 million condominium with monthly maintenance
fees of $300. You will place a downpayment of $400,000 for the condominium and finance the remainder with a 30-year housing loan, payable by monthly instalments. You are charged 4% per annum for the housing loan.
(a) Calculate the amount you need to pay every month for the condominium. Employ an
amortisation table (up to 13 months) showing how much you will pay in interest every
month, the principal repaid and the outstanding principal at the end of each month.
What is the outstanding principal at the end of 13 months?
What is the interest amount paid at the end of 6 months?
Explain to your family members the various components involved in calculating
the outstanding principal at the end of each month.
(20 marks)
(b) Suppose the monthly maintenance fee of $300 increases to $400 from the next year
onwards. Calculate how much you will have paid for the first 2 years. Assume an EAR
of 3% p.a.
(5 marks)
(c) You are presented with what the loan company touts to be a very attractive loan
proposition. Borrow $10,000 for 3 years at interest of 12% per annum with monthly
repayments of $390.26. Compare this with the interest rate you are charged for the
housing loan and comment on your results.
(10 marks)
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