NOTE FOR TUTOR: PLEASE FILL IN THE EXCEL CELLS ATTACHED AND CREATE THE LOAN REPAYMENT TOO AND PROVIDE EXPLANATIONS OF WHICH EXCEL FUNCTION WAS USED AND WHY.

QUESTION 1

Today, Malorie takes out a 20-year loan of $200,000, with a fixed interest rate of 5.3% per annum compounding monthly for the first 3 years. Afterwards, the loan will revert to the market interest rate.

Malorie will make monthly repayments over the next 20 years, the first of which is exactly one month from today. The bank calculates her current monthly repayments assuming the fixed interest rate of 5.3% will stay the same over the coming 20 years.

(a) Calculate the size of the repayment that the bank requires Malorie to make at the end of the first month.

(1 mark)

Today, Malorie takes out a 20-year loan of $200,000, with a fixed interest rate of 5.3% per annum compounding monthly for the first 3 years. Afterwards, the loan will revert to the market interest rate.

Malorie will make monthly repayments over the next 20 years, the first of which is exactly one month from today. The bank calculates her current monthly repayments assuming the fixed interest rate of 5.3% will stay the same over the coming 20 years.

(b) Calculate the loan outstanding at the end of the fixed interest period (i.e. after 3 years).

(1 mark)

Today, Malorie takes out a 20-year loan of $200,000, with a fixed interest rate of 5.3% per annum compounding monthly for the first 3 years. Afterwards, the loan will revert to the market interest rate.

Malorie will make monthly repayments over the next 20 years, the first of which is exactly one month from today. The bank calculates her current monthly repayments assuming the fixed interest rate of 5.3% will stay the same over the coming 20 years.

(c) Calculate the total interest Malorie pays over this fixed interest period.

(1.5 marks)

Today, Malorie takes out a 20-year loan of $200,000, with a fixed interest rate of 5.3% per annum compounding monthly for the first 3 years. Afterwards, the loan will revert to the market interest rate.

Malorie will make monthly repayments over the next 20 years, the first of which is exactly one month from today. The bank calculates her current monthly repayments assuming the fixed interest rate of 5.3% will stay the same over the coming 20 years.

(d) After the fixed interest period, the market interest rate becomes 6.3% per annum effective. Assuming the interest rate stays at this new level for the remainder of the term of the loan, calculate the new monthly installment.

(1.5 marks)

Transcribed Image Text:

lome Layout Tables Charts SmartArt Formulas Edit Font Data Alignment Review Number Format C Fill Calibri (Body) 11 Clear U D A A A abc Wrap Text General Currency 2 Normal Bad Merge % .00 .00 Conditional Formatting Good Neutral Calculation Insert De F12 fx C D E G H J K L part (a) part (b) part (c) part (d) F You may find it helpful to create a loan repayment schedule for the interest only period Loan Repayment Schedule Month Balance at beginning 1 Interest Repayment Balance at end Question 1 Question 2 Question 3 + Sum-0 Normal View Ready lome Layout Tables Charts SmartArt Formulas Edit Font Data Alignment Review Number Format C Fill Calibri (Body) 11 Clear U D A A A abc Wrap Text General Currency 2 Normal Bad Merge % .00 .00 Conditional Formatting Good Neutral Calculation Insert De F12 fx C D E G H J K L part (a) part (b) part (c) part (d) F You may find it helpful to create a loan repayment schedule for the interest only period Loan Repayment Schedule Month Balance at beginning 1 Interest Repayment Balance at end Question 1 Question 2 Question 3 + Sum-0 Normal View Ready