2017 Sy dney Gr2mm:u- School 2 U

Geoff has found an idyllic beach house and needs to borrow $800 000 from the bank to
finance his purchase. The loan and interest is to be repaid in equal monthly instalments
of $1'-1, at the end of each month, over a 25 year period. The reducible interest will
be charged at 4·83 p.a. and compounded monthly. As an extra inducement the bank
agrees that the first six months of the loan can be interest free, although Geoff will
begin making repayments from the end of the first month.

Let $An be the amount owing to the bank at the end of n months.
(i) Given A6 = 800 000 - 6M, write down an expression for A1 and show that the ~
amount owing after eight months is given by
As = (800 000 - 6M)1·0042 - M(1·004 + 1).
(ii) Hence show
An = (800 000 - 6J\1)1·004n- 5 - 250J\1(1·004n- 5 - 1).
(iii) Calculate the monthly instalment, $M, Geoff will need to pay in order to repay ~
the loan on time. Give your answer correct to the nearest cent.
Hurlstone 2014' 2 U Tri2ls

Kylie invests $Pat 9% per annum compounded annually.

She plans to withdraw $5000 at the end of each year for six years to cover
university fees.

(i) Write down an expression for the amount $A 1 remaining in the account 1
following the withdrawal of the first $5000.

(ii) Find an expression for the amount $A3 remaining in the account after 2
the third withdrawal.

(iii) How much does Kylie need to invest ifthe account balance is to be $0 2
at the end of the six years?
b:u-ker2010-2u

(i) Greg borrows $400000 is order to buy an apartment. The interest rate
is 6% p.a. reducible and the loan is to be repaid in equal monthly
repayments of $Mover 25 years with the interest calculated monthly.
Let $An be the amount owing after the nth repayment.

(a) Write down expressions for $A 1 and $A2 , the amounts owing
after the first and second repayments have been made respectively. 1

(/3) Show that the amount of each monthly repayment is $2577.21

(correct to the nearest cent). 2

(ii) After 5 years (i.e. 60 repayments) the interest rate rises to 9% p.a.
Find the new monthly repayment $N, correct to the nearest cent.
(Assume that the period of the loan is still 25 years). 3

(iii) How much extra does Greg repay over the life of the loan as a result
of the 3% p.a. interest rate rise? 1