Alice was approved a home equity loan of RM300,000 from National bank to support her purchase of a double storey house. The interest rate is stated at 1.25% above base rate. The repayment period is 30 years and the monthly instalment is RM1,561.61. The current base rate is at 4%.

Compute the interest owed at the end of 2nd month. (4 marks)

(ii) Compute the new outstanding loan balance after two months payment.

(2 marks)

(iii) Explain how bank determine the "1.25%" rate.