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A company has borrowed $800,000 from a bank. The loan is to be repaid by level instalments, payable annually in arrear for 10 years from the date the loan is made. The annual repayments are calculated at an effective rate of interest of 8% per annum. (1) Calculate the amount of the level annual payment and the total amount of interest which will be paid over the 10 year term. [3] (ii) At the beginning of the eighth year, immediately after the seventh payment has been made. the company asks for the term of the loan to be extended by two years. The bank agrees to do this on condition that the rate of interest is increased to an effective rate of 12% per annum for the remainder of the term and that payments are made quarterly in arrear. (a) Calculate the amount of the new quarterly payment. (b) Calculate the capital and interest components of the first quarterly instalment of the revised loan repayments. (6] [Total 9] A property developer is constructing a block of offices. It is anticipated that the offices will take six months to build. The developer incurs costs of 140 million at the beginning of the project followed by f3 million at the end of each month for the following six months during the building period. It is expected that rental income from the offices will be f1 million per month, which will be received at the start of each month beginning with the seventh month. Maintenance and management costs paid by the developer are expected to be f2 million per annum payable monthly in arrear with the first payment at the end of the seventh month. The block of offices is expected to be sold 25 years after the start of the project for fG0 million. (i) Calculate the discounted payback period using an effective rate of interest of 10% per annum. [7] (ii) Without doing any further calculations, explain whether your answer to (i) would change if the effective rate of interest were less than 10% per annum. [3] [Total 101