ask: A loan of £1800 is to be repaid with 12 equal monthly instalments. The nominal rate of interest i(12) for the transaction is 6% per annum convertible 12-thly. Find the amount of each monthly repayment, assuming that payments are made at the end of each month, at the beginning of each month.
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Task: A loan of £1800 is to be repaid with 12 equal monthly instalments. The nominal rate of interest i(12) for the transaction is 6% per annum convertible 12-thly. Find the amount of each monthly repayment, assuming that payments are made
- at the end of each month,
- at the beginning of each month.
Answer: Let the unit of time be months. Then the (effective = nominal) rate of interest per unit time is (blank). Let the monthly repayment in £ be X. Then (blank) = X (v + v^2 + ... + v^12) = X a12]
We calculate the
(blank)
Thus X = (blank)
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