Question

You wish to buy a house five years from now, which will expectantly cost $550,000 after five years. You will pay parts of this price from your personal deposit. You will cover the rest of the purchase price by taking two types of loans at the time of purchase: a 4-year fixed-interest personal loan of $20,000 - a 25-year fixed-interest house loan for the rest of the house price (.e. after paying from the personal deposit and the $20,000 taken as a personal loan at the time of purchase) Currently, you have $5,000 on deposit in a bank account, providing 2.5% p.a. interest compounded monthly. You will also deposit $1,000 monthly into this bank account from now until you purchase the house after 5 years. You also have the following information concerning loans from your bank: Loan Type Interest Rate Interest Compounded Loan Application 25-year fixed interest house loan 4-year fixed-interest personal loan 5% p.a. 10% p.a. Monthly Semi-annually $100 The loan application fee will be added to the amount you borrow from the bank and the repayment will be based on the total amount borrowed (inclusive of loan application fee). Assume that this loan information will remain identical when you purchase the house after five years. For the loans, your repayment frequency per year will be the same as the frequency of interest compounding per year. Thus, for the 25-year house loan, you will repay at the end of every month; and for the 4-year personal loan, you will repay at the end of every semi-annum.

Answer 1

a) Amount in the Bank account will be the accumulated value of the initial deposit of 5000 plus the installments deposited in the account every month.

Initial deposit Installments term interest rate 5000 1000 5 years 2.50% pa manoma omto FV 69505.54411 =FV(C5/12,04*12,-C3)+ FV(C5/12,04*12,,-C2) 9 b) 10 House cost deposit amount Personal Loan House Loan 550000 69505.54411 20000 460494.4559 =C9-C10-C11 12 14 c) 15 House Loan Term Rate EMI 460494.4559 25 years 5% pa compounded monthly $2,692.00 =PMT(C16/12,015*12,-C14) 17 18

d)

R19 19 d) Total Personal Loan Rate term Installment 20100 - 20000+100 4% pa compounded semiannually 4 years $2,743.85 =PMT(C20/2,c21*2,-C19) Year Amount Repayment Interest at start Repayment Capital Repayment 0 20100 0.5 20100 $2,743.85 1 17758.15 $2,743.85 1.5 15369.47 $2,743.85 2 12933.01 $2,743.85 2.5| 10447.82 $2,743.85 3 7912.934 $2,743.85 3.5 5327.346 $2,743.85 4 2690.046 $2,743.85 Formula Usedl=H31 =$C$22 0 4021 $2,341.85 355.1630607 $2,388.68 307.3893827 $2,436.46 258.66023111 $2,485.19 208.9564965 $2,534.89 158.2586872 $2,585.59 106.54692171 $2,637.30 53.80092084 $2,690.05 =D32*$C$20/2 =E32-F32 Loan Balance at the end of the year 20100 17758.15304 15369.46914 12933.01156 10447.82482 7912.934358 5327.346083 2690.046042 =D32-532