WRITTEN RESPONSES ONLY. I NEED TO WRITE THR ANSWERS ON PAPER SHOWING ALL WORKING OUT SO PLEASE DO WRITTEN RESPONSES WITH ALL WORKING OUT PLEASE AND THANK YOU
I HAVE GOTTEN THE ANSWERS FOR A,B,C,D - HAVE ATTACHED THEM HOWEVER I AM MISSING ANSWERS FOR E,F,G PLEASE. AGAIN (ONLY WRITTEN ANSWERS FOR E,F,G NEEDED WITH ALL WORKING OUT)
ACSTlOOl Mid-Sem Online Quiz Questions lGerald has taken out a loan of $100,000I today to start a business. He has agreed to repay the loan on the following terms: - Repayments will he made on a monthly basis. The rst repayment will be made exactly one month from today. a The repayments for the rst 5 years will cover interest only to help reduce the nancial burden for Gerald's business at the start. 0 After the 5year interestonly period, Gerald will make level monthly payments that will fully repay the loan after an additional 15 years (Le. 20 years from today, the loan will be fully repaid). 0 The interest charged is 5% p.a. e'ectiye. Using this information, answer the following questions' a) Calculate the equivalent effective monthly rate on the loan. {1 mark) b) Calculate the size of the rst repayment due exactly one month from now. {I mark) c) Calculate the use of the level repayments that occur after the initial 5year interestonly period. (2 marks) 10 years have passed, and Gerald's business is doing well. Further, he has made all the repayments on his loan so far as described above, and has just made the repayment due today. However, it has just been announced that the interest rate on Gerald's loan will go up to 5.5% p.a. compounding semiannually. d) Calculate the new equivalent effective monthly rate on the loan. {1 mark) e) Calculate the current loan outstanding (again, it is 10 years after the loan was initially taken out). Note that the new interest rate only applies from today onwards. (2 marks) f) Because Gerald 's business is doing well, he decides to repay a lump sum of $10,000 immediately. To further reduce the amount of interest he is paying to the bank, he will increase his monthly repayments to $1,000 per month. How many full repayments of $1,000 does Gerald have to make in order to fully repay this loan? (Note: Gerald may need to make a further, smaller payment in the subsequent month) (2 marks) g) Calculate the size of the smaller payment. {1 mark) (a ) As we are given- annual effective rate = 5 %. let the monthly rate is r. .: (Its ) 12 = ( 1+ 5 ) ( 1+4 ) 12 = (1+ 0 05) ( ItM) = (1:05) ( 1/12 ) Its = 1. 00407 9 = 1:00427-1 * = 0.00407 : Equivalent an effective monthly rate = 0. 00 407 = 0 .0 040*x land = 0 . 407 %. ( b) furst supayment = loan amount x effective monthly rate : first repayment = 100000x 0. 4077. = 40700 x1 = 407 Hence, first veepayment will be $ 407(C ) we will find the size of level repayment after 5 years Equivalent effective monthly rate = 0. 407%. number of months of the level baymont = 15 years x 12 months = 180 months. loan = $ 100000 . reebaymont amount will be $785. 04 . ( d ). we will find new equivalent effective rate. New annual effective rate = 5.5%. let the monthly rate ( annual ) is r. ( 1+ * ) 12 = (1+ 5-5) Too ( 1+4) 12 = (1+0.055) Itx = (1055 ) 1 12 It * = 1. 004 47 XX = 1 1 004 47 - 1 = 0 . 004 47 " : New equivalent monthly Interest scale = 0100447 7 100 = 0 . 447%. Hence, these are the answers
