Practise using annuity models to calculate payments, present or accumulated value, loan balances and repayment periods, while checking compounding, rounding and currency.
Give all answers in this question to the nearest dollar.
Anika invested 10000 Canadian dollars (CAD) in an account which earns a nominal annual interest rate of 3.4 %, compounded monthly.
Determine the amount of Anika's loan.
Anika amortizes her loan over 15 years. She arranges to make a loan payment at the end of each month. The nominal annual interest rate for the loan is 6.4 %, compounded half-yearly.
212741 (CAD)
Determine Anika's monthly loan payment.
After 2 complete years, Anika decides to increase her monthly loan payment to 2200 CAD. At the time, the remaining amount of the loan is 194572 CAD.
N=180
F V=0
I %=6.4
PV=±212741
P / Y=12
C / Y=2
Note: Award M1 for attempt to use a financial app with at least three entries seen, but not necessarily correct, A1 for N and I, A1 for P / Y and C / Y, A1 for their P V from (b) and F V=0. Approaches that use the compound interest formula receive no marks.
( P M T= ) 1832 (CAD)
Note: Accept -1832 (CAD).
Calculate the amount by which the loan will decrease during the next 3 complete years.
N=36PV=±194572
PMT = 2200
Note: Award M1 for adjusting at least one of N, P V, or P M T;
A1 for correct entries ( P V and P M T must have opposite signs). Allow FT from incorrect entries for P / Y and/or C / Y from part (c).
( F V= )148099 (CAD)
(194572-148099)
46473 (CAD)
Determine the total interest that Anika will pay over this 3 -year period.
2200×12×3(=79200)
(79200-46473=)
32727 (CAD)