Question: 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

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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