You took out a $500,000 fully amortising loan at a variable interest rate of 3.2% pa and a term of 30 years. Ten months later, just after your tenth monthly payment, the bank increases the interest rate to 4.8% pa.

Assume that rates were and are expected to remain constant.

Which of the following statements is NOT correct?

a.

The monthly payment at the original interest rate of 3.2% was $2,162.33

b.

After the rate changes to 4.8%, the monthly payment is $2,612.47

c.

The principal outstanding at the time of the rate change (T=10) is $483,948.16

d.

If you want to keep the same monthly payment after the rate change, and the bank allows you to pay the loan over a longer period, it will take 602 months to repay the loan.

e.

From the banks point of view, the interest rate change represents an increase in the income return on a debt asset.