A personal loan of RM100,000 is offered with two repayment options as follows: First option is to pay level monthly payments at the end of each month for 30 years at a nominal interest rate of 12% convertible monthly. Second option is to pay monthly interest payments to the lender at the end of each month for 15 years, at a nominal interest rate of 12% convertible monthly. Principal is to be accumulated by making level annual payments at the end of each year for 15 years into a sinking fund earning interest at an annual effective rate j. The total payment under the second option is RM125,000 less than the total payment under the first option. Calculate j.
A personal loan of RM100,000 is offered with two repayment options as follows: First option is to pay level monthly payments at the end of each month for 30 years at a nominal interest rate of 12% convertible monthly. Second option is to pay monthly interest payments to the lender at the end of each month for 15 years, at a nominal interest rate of 12% convertible monthly. Principal is to be accumulated by making level annual payments at the end of each year for 15 years into a sinking fund earning interest at an annual effective rate j. The total payment under the second option is RM125,000 less than the total payment under the first option. Calculate j.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A personal loan of RM100,000 is offered with two repayment options as follows:
-
First option is to pay level monthly payments at the end of each month for 30 years at a nominal interest rate of 12% convertible monthly.
-
Second option is to pay monthly interest payments to the lender at the end of each month for 15 years, at a nominal interest rate of 12% convertible monthly. Principal is to be accumulated by making level annual payments at the end of each year for 15 years into a sinking fund earning interest at an annual effective rate j.
The total payment under the second option is RM125,000 less than the total payment under the first option. Calculate j.
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