Question

Question 1 Kes has approached a loan company with the aim of borrowing £11,000. Kes accepts that this will be repaid in level monthly instalments (in arrears) for 10 years. The loan company has agreed with Kes that a setup fee of £500 should be added to the loan amount. This additional cost represents the extra administrative work that they had to carry out in assessing her credit worthiness. This will be part of her repayments she makes to the loan company. The effective interest rate that Kes pays is 6% per annum. (a) Calculate the monthly repayment that Kes will be required to pay [4 marks) (b) After Kes has made her 2nd full year of repayments, she contacts the loan company and asks if she can reduce her repayment to half the amount calculated in (a). The loan company agrees to this change and that the interest rate she incurs is to be increased to 7% per annum effective. The company also charges an administrative fee of £100 that will be added to the loan outstanding. Calculate how long it will now take for Kes to repay the loan. [4 marks)

Loan question. I think I can do 1a correctly but no clue on b.

p.s I got repayment for 1a) as R=£127.67

Answer 1

Final answer is 390.66 months

a	Monthly repayments	$127.67
b	Principal paid off in 2 years	-1784.65
	Balance loan	9715.349
	Total loan due	9815.349
	Monthly payment required	$63.84
	Interest rate	7% pa
	No of months required to repay the balance	390.656

Workings

AutoSave © of HO- Book1 - Excel Sign in - o X File Home Insert Draw Page Layout Formulas Data Review View Help O Tell me what you want to do Share Comments = = = Calibri 11 BI U - - - A À - A - open alle General E 3- $ - % 9 OSOS Conditional Format as Formatting Table Insert Delete - Format 2' AZ O T- Sort & Find & Filter - Select Paste Cell Styles Clipboard Font Alignment Number Styles Cells Editing 04 =CUMPRINC(6%/12,10*12,11500,1,2*12,0) А. - N Monthly repayments =PMT(6%/12,10*12,-11500) O = Principal paid off in 2 years Balance loan Total loan due =CUMPRINC(6%/12,10*12,11500,1,2*12,0) =11500+04 =D5+100 0 o C Monthly payment required =D2/2 Interest rate 7% pa No of months required to repay the balance =NPER(7%/12,-D8,06) 11 12 13 16 | 17 Sheet1