Loan Question (1 Viewer)

[rama_v]

The Smith's borrow $150 000 from the Bank at 9% pa. compounded monthly for 25 years. The Bank has a special deal - no repayments are required for the first nine months.

(i) Show that the amount owing after 1 month is: 150 000 (1.0075)
(ii) Show an expression for the amount owing after 10 months assuming the monthly repayment is $M
(iii) Derive a similar expression for the amount owing after n months
(v) Calculate (to the nearest cent) the amount of each monthly payment

I got an answer, but I think I may have got the n mixed up...

 

[Xayma]

In general the easiest way to do this would be to find out the size of their debt afer 9 months, then work off that.

For iii) Let m=n-9
for iv) n=300 so there are 291 payments.

 

[rama_v]

Thanks, I got the answer...The thign that was confusing is that the series went up to M(1 +R)^n-10 and there are in face 291 terms when u sum it up. But I got it eventually...