Mr. Vinnie Totti is seeking to purchase an apartment for $200,000. The Wakpak Bank is prepared to lend Vinnie 75% of the
Posted: Sun Jun 05, 2022 7:23 am
Mr. Vinnie Totti is seeking to purchase an apartment for
$200,000. The Wakpak Bank is prepared to lend Vinnie 75% of the
purchase price with the remaining amount to be funded from personal
savings. The loan repayments to Wakpak are to be made monthly (with
the first payment due one month after the loan is provided) for a
term of 15 years, and the stated annual interest rate quoted by
Wakpak is 9.25% p.a. compounded monthly.
a What will be the amount of Vinnie’s monthly loan
repayments?
b Immediately after paying the 36th loan repayment, Vinnie
wishes to pay out the loan in full. How much will be needed to pay
out the loan at this time?
c (i) Discuss whether there are benefits to Vinnie from changing
the frequency of loan repayments from monthly to fortnightly (with
each repayment now being 50% of the monthly payment calculated in
part a) of this question), as has been suggested by his colleagues
at the local produce market where he works on a casual basis as a
delivery driver. (Students should write no more than 100 words for
this part of the question).
(ii) Would there be any disadvantages to Vinnie arising from
increasing the frequency of making loan repayments from monthly to
fortnightly as indicated in part c) (i) of this question? (Students
should write no more than 100 words for this part of the
question).
(i) Using the information provided at the start of this question
(including the interest rate of 9.25% p.a. compounded monthly),
however, Vinnie commences to make loan repayments which were now
equal to an amount of 50% of the repayment calculated in part a) of
this question. Also, the loan repayments were now made at the
commencement of each fortnight (that is, the first repayment would
be made at the date of the loan and fortnightly thereafter). Given
this information, over what approximate total term (expressed in
years and months) would Vinnie now repay the loan in full?
(ii) Ignoring the amount of the final loan repayment to reduce
the loan balance to nil, approximately how much interest would
Vinnie save (expressed in nominal dollars) by undertaking the
repayment strategy in part d) i) of this question, as compared to
making end-of-month loan repayments over a term of 15 years (as
calculated in part a) of this question)?
(iii) Given the new loan repayment strategy in part d) i) of
this question, what would be the amount of the final repayment
required to reduce the loan balance to nil? Assume that the final
repayment will be made 1 fortnight after the last regular
fortnightly repayment amount
$200,000. The Wakpak Bank is prepared to lend Vinnie 75% of the
purchase price with the remaining amount to be funded from personal
savings. The loan repayments to Wakpak are to be made monthly (with
the first payment due one month after the loan is provided) for a
term of 15 years, and the stated annual interest rate quoted by
Wakpak is 9.25% p.a. compounded monthly.
a What will be the amount of Vinnie’s monthly loan
repayments?
b Immediately after paying the 36th loan repayment, Vinnie
wishes to pay out the loan in full. How much will be needed to pay
out the loan at this time?
c (i) Discuss whether there are benefits to Vinnie from changing
the frequency of loan repayments from monthly to fortnightly (with
each repayment now being 50% of the monthly payment calculated in
part a) of this question), as has been suggested by his colleagues
at the local produce market where he works on a casual basis as a
delivery driver. (Students should write no more than 100 words for
this part of the question).
(ii) Would there be any disadvantages to Vinnie arising from
increasing the frequency of making loan repayments from monthly to
fortnightly as indicated in part c) (i) of this question? (Students
should write no more than 100 words for this part of the
question).
(i) Using the information provided at the start of this question
(including the interest rate of 9.25% p.a. compounded monthly),
however, Vinnie commences to make loan repayments which were now
equal to an amount of 50% of the repayment calculated in part a) of
this question. Also, the loan repayments were now made at the
commencement of each fortnight (that is, the first repayment would
be made at the date of the loan and fortnightly thereafter). Given
this information, over what approximate total term (expressed in
years and months) would Vinnie now repay the loan in full?
(ii) Ignoring the amount of the final loan repayment to reduce
the loan balance to nil, approximately how much interest would
Vinnie save (expressed in nominal dollars) by undertaking the
repayment strategy in part d) i) of this question, as compared to
making end-of-month loan repayments over a term of 15 years (as
calculated in part a) of this question)?
(iii) Given the new loan repayment strategy in part d) i) of
this question, what would be the amount of the final repayment
required to reduce the loan balance to nil? Assume that the final
repayment will be made 1 fortnight after the last regular
fortnightly repayment amount