Question 1 (30 marks)

Suppose a borrower obtains a fully amortizing loan for $1,000,000 at 5% interest (compounding annually) for 4 years.

(a)If the loan is repaid annually, evaluate the annual loan repayment amount. (5 marks)

(c) Suppose the financial institution allows the borrower to repay the loan in 15 years, keeping the other conditions the same.

1. Evaluate the annual loan repayment amount. (5 marks)
2. Using a financial calculator, evaluate the ending loan balance after the loan repayments in the 11th year. (5 marks)
3. Using a financial calculator, evaluate the principal amount repaid in the 9th year.(5 marks)

Answer rating: 100% (QA)

a To evaluate the annual loan repayment amount for a fully amortizing loan we can use the formula fo... View the full answer