Question: Problem 1 (Required, 25 marks) A borrower has borrowed $2000000 from the bank. It is given that the loan charges interest at an annual effective

Problem 1 (Required, 25 marks) A borrower has borrowed $2000000 from the bank. It is given that the loan charges interest at an annual effective interest rate 16.0755% and compound interest is assumed. (a) Suppose that the borrower decides to repay the loan by 180 monthly payments made at the end of every month, (i) Using retrospective method, calculate the outstanding balance at 60th repayment date. (ii) Calculate the interest due and principal repaid in 120th repayment. (b) Suppose that the borrower decides to repay the loan by m monthly repayment of amount $30000 each plus a drop payment made one month after the man repayment, calculate the amount of drop payment and determine the time taken to repay the loan completely (*In this problem, we assume that the first repayment will be made 1 month after today.)

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