Question: An investor borrows 1,000 by taking out an interest-only loan at an effective rate of interest of 6% pa, and invests the money in

An investor borrows 1,000 by taking out an interest-only loan at an

An investor borrows 1,000 by taking out an interest-only loan at an effective rate of interest of 6% pa, and invests the money in a project. The loan is to be repaid in full after 2 years (with no early repayment option) and interest on the money borrowed is paid at the end of each month. The project will provide income of 50 at the end of each month for 24 months and the investor can invest spare funds at an interest rate of 5% pa effective. Calculate the accumulated profit at the end of 2 years.

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