Question: Answer ALL the questions. The following table shows the items of assets, liabilities, cash inflows, and cash outflows for Ho in December. Items $ Items
Answer ALL the questions.
- The following table shows the items of assets, liabilities, cash inflows, and cash outflows for Ho in December.
| Items | $ |
| Items | $ | |
| Cash on hand | 15,000 | Interest earned on savings | 2,800 | ||
| Salary | 40,000 | Personal possessions | 10,200 | ||
| Cash value of life insurance | 8,000 | Value of stocks holding | 60,000 | ||
| Personal loan balance | 107,500 | Instalment loans payment | 2,000 | ||
| Interest earned on CD | 1,500 | Renter insurance | 800 | ||
| Auto loan balance | 200,000 |
| Current value of auto | 305,000 | |
| Food expenditure | 3,500 | Repayment of Auto loan | 2,500 | ||
| Rent | 12,000 | Expenses on transportation | 2,500 | ||
| Life insurance premium | 500 | Expenses on electricity | 1,500 | ||
The following table shows the mortgage plans offered by two banks.
| Bank A | Bank B | |
| Prime rate | 5.5% | 5% |
| Spread | 3.15% | 2.25% |
| Cash reimbursement | 1% | 1% |
| Loan period | 30 Years | 20 Years |
| Interest penalty | No | 1% of the mortgage loan for within the 1st year |
A. Work out the cash flow statement for Ho and calculate the surplus.
(12 marks)
B. He is planning to buy a flat of $6M five years later. If he decides to save the surplus (calculated above) each month for five years and put the money into an investment which gives him interest of 6% p.a. compound monthly, does he have enough money for making the down payment (He may go for the Mortgage Insurance Programme).
(7 marks)
C. Which mortgage plan should he choose? Why?
(3 marks)
D. What is the monthly payment on the mortgage if he makes only the minimum down payment?
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