Hi, im having trouble breaking down this question, could you please demonstrate them. thank you! You are
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Hi, im having trouble breaking down this question, could you please demonstrate them. thank you!
You are buying a car at a cost of $42,000 by taking a loan. The nominal interest rate is 9% per annum compounded monthly. The bank offers 2 options for the structure of the repayments.
- Option 1: The loan will be repaid over 10 years by equal month-end-instalments.
a) Calulate the monthly installment.
b) Calculate the interest component for the 20threpayment.
c) Calculate the loan outstanding immediately after 8 years(immediately after the payment on that date).
d) Hence or otherwise, calculate the cumulative principal repayments during the 9thyear.
- Option 2: Month-end-instalments of $X will be made for the first 3.5 years. Then the bank offers you a payment free period (i.e., no repayments required) of 1 year. After that, the remaining balance will be repaid over 3.5 years by month-end-instalments of $2X.
e) Calculate X. (3 marks)
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