Homework Answers
Loan Amount (PV) = $75,000
No of monthly repayment to be made (N) = 30 years x 12 = 360
Monthly rate of interest (I) = 12%p.a. /12 = 1% per month
Monthly installment amount (PMT) = ?
Using financial calculator or PMT function in excel,
Monthly installment amount (PMT) = $771.46
If interest rate increases to 13%p.a.
Value of Loan (PV) = ??
No of monthly repayment to be made (N) = 30 years x 12 = 360
Monthly rate of interest (I) = 13%p.a. /12 = 1.0833% per month
Monthly installment amount (PMT) = $771.46
Using financial calculator or PV function in excel,
Value of Loan (PV) = $69,739.63
Therefore loss due to increase in interest rate to 13% = 69,739.63 - 75000
Therefore loss due to increase in interest rate to 13% = ($ 5260.37)
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