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You are the finance manager of your company. Your company is planning for capacity expansion and...

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Advance Math

You are the finance manager of your company. Yourcompany is planning for capacity expansion and need to borrowRM850,000 from a local bank. The offered term loan will beamortised in 9 years with a nominal interest rate of 7.2% p.a.compounded monthly. The final payment will be at the end of Year9.

1.Based on your working on an amortisation table, howmuch principal and interest would have your company paid after thefirst four months of payments?

2.If you have a choice, would you prefer to repay theabove loan monthly (assume7.2% per year is compounded monthly) orannually (assume 7.2% per year is compounded annually) based on thetotal interest incurred? What is the main factor that contribute tosuch a difference in interest?

Answer & Explanation Solved by verified expert
3.9 Ratings (390 Votes)
AnswerAOption1 Repayment of loan monthly at the end of eachmonthMonthly fixed payment will be calculated as follows byAnnuity methodPV of the monthly payment Monthly payment 1071664Payment Every Month1071664Total of 108Payments115739752Total Interest30739752Beginning Balanceemailprotected per month on openingbalancePrincipal paymentTotal Payment Interest PrincipalEnding Balance185000000510000561664107166484438336284438336506630565034107166483873301383873301503240568425107166483304877483304877499829571835107166482733042582733042496398575266107166482157775682157775492947578718107166481579058781579058489474582190107166480996868880996868485981585683107166480411185980411185482467589197107166479821987107982198747893259273210716647922925511792292554753765962891071664786329661278632966471798599867107166478033099Year 1    See Answer
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