Alan borrows $100,000 at nominal interest rate 9% per annum which matures in 5 years. Repayments are made monthly such that each monthly payment in the last 2 years is twice that in the first 3 years. a) Calculate the monthly payments for this loan. b) Construct the amortization table for this loan which includes the following columns Installment, Interest payment, Principal payment, Outstanding balance.
Alan borrows $100,000 at nominal interest rate 9% per annum which matures in 5
years. Repayments are made monthly such that each monthly payment in the last 2
years is twice that in the first 3 years.
a) Calculate the monthly payments for this loan.
b) Construct the amortization table for this loan which includes the following columns
Installment, Interest payment, Principal payment, Outstanding balance.
c) After 3 years, the market nominal interest rate falls to 6% per annum. Alan wants
to terminate the loan. The bank charges the termination fee which is 40% of the
difference in total remaining interest payment. Calculate the amount Alan needs
to pay the bank (including outstanding balance and termination fee).
d) Alan borrows the amount in part c) at 6% per annum. If he keeps to the current
monthly payment, how long will he pay off everything ?
e) What is Alan’s monthly payment if he decides to keep to his schedule of paying
off the debt in the next 2 years ?
f) Suppose Alan follows the payment schedule in part e). Write down the equation of
value for the cash flow generated by Alan in terms of the hypothetically constant
monthly
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