Question: Problem 2 (25 marks) Mr. B borrows an amount L from the bank today and agrees to repay the loan by m monthly payments (of

Problem 2 (25 marks) Mr. B borrows an amount L from

Problem 2 (25 marks) Mr. B borrows an amount L from the bank today and agrees to repay the loan by m monthly payments (of amount X each) plus 1 balloon payment (smallest balloon payment) made one month after the mth payment. The first repayment is made one month after today. You are given that The loan charges compound interest at an annual effective interest rate i = 21.7% The interest-due in 10th payment is 1030.847. The principal repaid in 20th payment is 1848.1581. Using prospective method, calculate the outstanding balance at 15th payment date. (Hint: What quantity do you need to calculate the balloon payment?) Problem 2 (25 marks) Mr. B borrows an amount L from the bank today and agrees to repay the loan by m monthly payments (of amount X each) plus 1 balloon payment (smallest balloon payment) made one month after the mth payment. The first repayment is made one month after today. You are given that The loan charges compound interest at an annual effective interest rate i = 21.7% The interest-due in 10th payment is 1030.847. The principal repaid in 20th payment is 1848.1581. Using prospective method, calculate the outstanding balance at 15th payment date. (Hint: What quantity do you need to calculate the balloon payment?)

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