Sydney Boys 20H 2U - q2

James borrowed $40 000 at 1.5% per month reducible interest and he decided to repay
the loan plus the interest in equal monthly instalments over 6 years.

(i) Calculate the value of his monthly repayments. 3

(ii) What annual rate of simple interest is the finance company charging him? 2
Sydney G r2tl".m2r 2017 2U T ri2ls

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 t o be repaid in equal mont hly instalments
of $1\!f, at the end of each month , over a 25 year period. The reducible interest will
be charged at 4·83 p.a. and compounded mont hly. 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 t he first month.

Let $An be the am ount owing to the bank at t he end of n months.

(i) Given A6 = 800 000 - 6M , write down an expression for A1 and show t hat the ~
amount owi ng after eight mont hs is given by
As = (800 000 - 6M)1 ·004 2 - M(1 ·004 + 1).
(ii) Hence show
An = (800 000 - 6.i\!f)1·004n- 5 - 250M(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 .
Sydney Boys 20H 2U HY

On Brendan's 20th birthday his grandparents place $500 000 in a trust account
that earns 8% per annum. Brendan receives one payment a year from the trust
account. He receives the first payment on his 21 st birthday. [8]

(a) If the payments are $M per year show that the amount, $A 2 , in the ttust
account after the second payment is

A 2 = 500 000 x 1.08 2 - M x 1.08 - M

(b) How much would each payment be if the trust account was to last for
20 years?

(c) If the payments were $75 000 per year, how many full payments would
Brendan receive?

(d) After the last full payment of $75 000 how much is still left in the trust.