Today is 1 July 2021. You are looking to purchase an investment property today (after months of research and negotiations). You have spoken to Peter, the loan specialist at Harrison Bank, to negotiate the terms of your mortgage. You and Peter have agreed to the following terms: You will borrow $760,000 today in order to purchase your chosen property. This mortgage will be repaid by level monthly repayments. Your first repayment to the bank will occur exactly 1 month from today, on 1 August 2021, and the final repayment will occur exactly 20 years from today, on 1 July 2041. Peter has arranged for an interest rate of 2.4% p.a. effective to be locked in for the life of this loan. Using the information provided, answer the following questions. It is highly recommended you draw a diagram to represent the given information. The first monthly repayment occurs on 1 August 2021, and the final monthly repayment occurs on 1 July 2041. How many repayments are there in this arrangement? Answer: The interest rate for the loan is 2.4% p.a. effective. Calcualte the equivalent nominal annual rate compounding monthly. Give your answer as a percentage to 4 decimal places, and do NOT include a percentage sign. Answer: 3 aved Calculate the equivalent effective monthly rate. Give your answer as a percentage to 4 decimal places, and do NOT include a percentage sign ut of Answer: 4 aved The last payment for the loan occurs on 1 July 2041. For the next question, we will refer to 2041 as the "final year". Type in the "final year" below (i.e. if the last payment occurs in 2031, type in 2031). d Answer: 5 aved Calculate the size of the level monthly repayment needed in order to fully repay the loan by 1 July 2041. Give your answer to the nearest cent, and do NOT include a dollar sign. ut of Answer: 6 ved ut of Determine the value of L 12. Give your answer to the nearest cent, and do NOT include a dollar sign. n7 saved out of The interest rate for the loan is 2.4% p.a. effective. Which of the following is the best next step before trying to calculate the required monthly repayment for the mortgage? a. No interest rate conversion is needed. The 2.4% can be used directly. b. Convert the 2.4% to an effective monthly rate, and use this rate directly to calculate the monthly repayments. c. Convert the 2.4% to a nominal annual rate compounding monthly, and use this new rate directly to calculate the monthly repayments. d. Divide 2.4% by 12 to work in months on 8 saved The first repayment of the loan occurs on 1 August 2021, and the final repayment occurs on 1 July in the "final year" as above. For each formula named below, select the corresponding valuation date (i.e. the point in time when the formula lands you) out of on PV ordinary annuity Choose... 4 FV annuity due Choose... FV ordinary annuity Choose... . PV annuity due Choose... 4 9 ved at of In preparation of your tax return, you need to calculate the interest charged on your loan so that you can claim it as a tax deduction. Specifically, you are interested in the financial year ending 30 June 2022. For the purposes of this question, pretend that the repayment on 1 July 2022 is occurring on 30 June 2022 so that there are 12 repayments made in this financial year. Further, the subscripts used for loan outstanding are measured in months, e.g. L240 is the loan outstanding after 240 months/20 years. In order to calculate the interest charged on the loan from 1 July 2021 to 30 June 2022, which value(s) of loan outstanding are needed? a. Lo only b. Lo and L 12 c. L12 only d. Lo, L1, and L12 What does the difference Lo - L 12 represent? 10 eved ut of a. The principal repaid in the first year of the loan. b. The principal repaid in the first 12 years of the loan. C. The interest paid in the first year of the loan. d. None of the other choices are correct What does the product L 12 X 112 represent? Question 11 Not yet saved Marked out of 1.00 a. The interest component of the 13th repayment. b. The interest component of the 12th repayment. C. Nothing. This expression is complete nonsense. P Flag question d. The interest paid in the second year
