Question

Please explain in details on how to calculate (b) and (c). Thank you.

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

Answer b) value of personal deposit= FV(5000) + FV(monthly deposit 1000)

Interest Rate	2.5% (annual)
Interest rate(monthly)	0.21%
Present Value (PV)	$5,000.00
Monthly Payment(pmt)	$1,000.00
Number of payment(nper)	60 (months)
Future Value	$69,543.20	FV(0.21%,60,-1000,-5000)

Amount of Personal Loan = $ 20,000.

Home loan Required = 550000 -(69543.20+20000) = $ 460456.8

or rounding to nearest zero , the value = $ 460460

Answer c) The monthly repayment of home loan ;

Interest Rate	5% (annual)
Interest rate(monthly)	0.417%
Present Value (PV)	$4,60,460.00
Number of payment(nper)	60 (months)
Monthly Repayment (PMT)	$2,692.88	PMT(0.417%,300,-460460)