Exactly 10 years ago a loan was taken out that was to be repaid by level annual instalments made inarrears over a 20-year contract. Given that the instalments (of capital and interest) were set to£1,043.05 based on a 7% per annum effective interest rate on the borrowing, calculate thefollowing:(i)(ii)The initial amount of loan taken out in this contract to the nearest £.The amount of loan outstanding immediately after the instalment now due is paid to thenearest £.It is agreed that immediately after the instalment now due the interest rate charged on theoutstanding loan is reduced to 5% per annum effective. Consequently, the level annualinstalments will be payable for a revised term but with a reduced final payment. Find:a) The revised term of the loan outstanding.b) The amount of the reduced final payment.c) The interest and capital component of the reduced final payment.

Here, Particulars Values Annual payment of loan (PMT) £ 1,043.05 Effective annual interest…

Exactly 10 years ago a loan was taken out that was to be repaid by level annual instalments made in arrears over a 20-year contract. Given that the instalments (of capital and interest) were set to £1,043.05 based on a 7% per annum effective interest rate on the borrowing, calculate the following: (i) (ii) The initial amount of loan taken out in this contract to the nearest £. The amount of loan outstanding immediately after the instalment now due is paid to the nearest £. (iii) It is agreed that immediately after the instalment now due the interest rate charged on the outstanding loan is reduced to 5% per annum effective. Consequently, the level annual instalments will be payable for a revised term but with a reduced final payment. Find: a) The revised term of the loan outstanding. b) The amount of the reduced final payment. c) The interest and capital component of the reduced final payment.

Exactly 10 years ago a loan was taken out that was to be repaid by level annual instalments made in arrears over a 20-year contract. Given that the instalments (of capital and interest) were set to £1,043.05 based on a 7% per annum effective interest rate on the borrowing, calculate the following: (i) (ii) The initial amount of loan taken out in this contract to the nearest £. The amount of loan outstanding immediately after the instalment now due is paid to the nearest £. (iii) It is agreed that immediately after the instalment now due the interest rate charged on the outstanding loan is reduced to 5% per annum effective. Consequently, the level annual instalments will be payable for a revised term but with a reduced final payment. Find: a) The revised term of the loan outstanding. b) The amount of the reduced final payment. c) The interest and capital component of the reduced final payment.

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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