Fo rt St 2016 2 U Tri~s

Samantha has retired with savings of $400000. She intends to live off this money by taking
equal monthly instalments of $Mat the start of each month, starting immediately.

Samantha receives 6% p.a. interest on her account balance at the end of each month.

Let $A,, be her account balance at the end of each month.

Show that ~=400000(1·005) -M(l· 005) -M(l· 005)

2 2
(i) 1

(ii) Show that A,, = 400000(1 ·005)" - M [ 201 ( l ·005" -1)] 3

(iii) Samantha would like her money to last 25 years. What monthly instalment does Samantha take? 2
Fo rt St 2017 2 U Tri~s

A country borrowed $500 million on January 1 2013 from the International Monetary Fund to build
infrastructure.. The country agreed to pay $1.5 million at the end of each month after a compounded
interest of 0.6% per month has been added to the debt.

(i) Show that the amount owed by the country on March 1 2013 is 2
A= 5x108 x l.006 2 -1.5x106 (1 + 1.006)

(ii) On November 30 2013 the country decided that their monthly payment for December would 4
be $2 585 562.38. Show that their debt on January l 2014 will be $517 520 479.60.

(ii i) The new government elected in the country decided to further increase their monthly payment 3
to $5 million beginning from the payment of January 2014 until the debt is paid. How long
will it take for the debt to be paid off? Give your answer in years and months.
G irr2ween 201.5 2 U Tri~ s

A farmer borrows $80 000 to purchase new machinery. The interest is calculated monthly at
the rate of2% per month, and is compounded each month.

The farmer intends to repay the loan with interest in two equal annual instalments of $M
at the end of the first and second years.

(i) How much does the farmer owe at the end of the first month? 1

(ii) Write an expression involving M for the total amount owed by the farmer after 2
12 months, just after the first instalment of $M has been paid.

(iii) Find an expression for the amount owed at the end of the second year and deduce that 2
24
M = 80 000 x ( 1.02 )
~~~~--'~~-=--
( 1.02) 12 + 1

(iv) What is the total interest over the two year period? 2
G irr2ween 2017 2 U Tri~ s

i. Alan borrows $10 000 at a.n interest rate of 12% pa, compounded monthly. [3]
Alan wants to pay off the loan with monthly repayments over 5 years. Find
the required monthly repayment.

ii. If Alan only wishes to pay $150 each month over 5 yea.rs, how much is he able [2]
to borrow under the same interest rate?