Suppose that you wanted to buy a house in Launceston and you borrowed $500,000 from the Commonwealth Bank. The bank offered an interest rate of j12 = 8% p.a. You agreed to repay this loan with monthly payments within 30 years, the first payment occurring one month after the loan was taken out. (a) Determine the monthly payment. (b) After making 25 payments you lost your job and missed the 26th, 27th, 28th, and 29th payments. By the time of the 30th, the payments were resumed. How big does the 30th payment have to be to return to the original repayment schedule? (c) After making 240 payments, the interest rate decrease to j12 = 6%. Determine the new size of the monthly payment so that you can still kill off the debt after 30 years as you agreed with the bank. (d) Construct an amortization table showing the last three payments (i.e two full pay- ments and a partial payment), and describe and perform a sanity check on the final outstanding principal. 5:15 pm

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
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Suppose that you wanted to buy a house in
Launceston and
you borrowed $500,000 from the Commonwealth
Bank. The bank offered an interest rate
of j12 = 8% p.a. You agreed to repay this loan with
monthly payments within 30 years,
the first payment occurring one month after the loan
was taken out.
(a) Determine the monthly payment.
(b) After making 25 payments you lost your job and
missed the 26th, 27th, 28th, and
29th payments. By the time of the 30th, the payments
were resumed. How big
does the 30th payment have to be to
return to the original repayment schedule?
(c) After making 240 payments, the interest rate
decrease to j12 = 6%. Determine the
new size of the monthly payment so that you can still
kill off the debt after 30 years
as you agreed with the bank.
(d) Construct an amortization table showing the last
three payments (i.e two full pay-
ments and a partial payment), and describe and
perform a sanity check on the final
outstanding principal.
5:15 pm
Transcribed Image Text:Suppose that you wanted to buy a house in Launceston and you borrowed $500,000 from the Commonwealth Bank. The bank offered an interest rate of j12 = 8% p.a. You agreed to repay this loan with monthly payments within 30 years, the first payment occurring one month after the loan was taken out. (a) Determine the monthly payment. (b) After making 25 payments you lost your job and missed the 26th, 27th, 28th, and 29th payments. By the time of the 30th, the payments were resumed. How big does the 30th payment have to be to return to the original repayment schedule? (c) After making 240 payments, the interest rate decrease to j12 = 6%. Determine the new size of the monthly payment so that you can still kill off the debt after 30 years as you agreed with the bank. (d) Construct an amortization table showing the last three payments (i.e two full pay- ments and a partial payment), and describe and perform a sanity check on the final outstanding principal. 5:15 pm
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