2013 B2ulkh2m Hills HS 2U T ri.

Kelvin borrows $200 000 from his bank. Interest is compounded monthly at 0.425% per
month. A 11 is the amount owed after n payments, $M is the amount of the monthly
instalments and the loan is repaid after n months.
(i) Show that A 2 = 200 000(1.00425) 2 - M(l.00425) - M 1

(ii) Show that the monthly repayment, $M is given by

3
200 000(1.00425)11(0.00425)
M = 1.0042511 - 1

(iii) Find the amount of the monthly instalments if Kelvin agrees to repay the loan 1
over 30 years.

(iv) How much wil l Kelvin pay in total after 30 years? 1

(v) If Kelvin instead decided to pay monthly instalment of$1331 from the beginning 2
of the loan, how long will he take to repay the loan?
2013 N orm2nhurst Boy s HS 2U T ri21

Felix bought a second hand car for $30,000 with borrowed money from a
finance company which charged him 18% p.a. reducible interest calculated
monthly. Felix agreed to pay back the loan plus interest at $900 per month.

(i) Show that the amount that Felix owed after his second payment was 1
2
A2 = 30, 000(1.015) -900(1+1.015).

(ii) Show that the amount owing after n payments have been made can be 3
expressed as A11 = 60,000 - 30,000(1.015)"

(iii) Hence find the number of months that Felix required to pay back the 1
loan plus interest.
2 01.5 Knox l\{2thenutics T ri21 P2per

A property investor requires a loan of $P from the bank to finance a purchase, with interest
charged at an introductory rate of 6% p.a. for the first 3 months. Initially the loan is to be repaid
in equal monthly repayments of $4000 over 3 years and interest is charged monthly before each
repayment.
Let $A11 be the amount owing after the nth repayment.

(i) Write down an expression for the amount owing after one month, $A1 • 1

(ii) Show that $A3 = P(l.005)3 - 4000(1 + 1.005 + 1.0052 ) . 2

(iii) At the end of three months the interest rate rises to 9% p.a. and the loan is to be repaid in
total in equal monthly repayments of $4800 for the next 2.75 years. Find the value of P. 2