9. You are planning to borrow $100,000 for a major purchase, to be repaid in equ
ID: 2648161 • Letter: 9
Question
9. You are planning to borrow $100,000 for a major purchase, to be repaid in equal monthly instalments over the next ten years. If interest rates are 13% per annum (compounded monthly), how much should each instalment be, if paid at the end of the month (to the nearest cent)?
9. You are planning to borrow $100,000 for a major purchase, to be repaid in equal monthly instalments over the next ten years. If interest rates are 13% per annum (compounded monthly), how much should each instalment be, if paid at the end of the month (to the nearest cent)?
Explanation / Answer
Interest= 13% p.a compounded monthly Hence, interest per month= 13%/12= 1.083% Period= 10 years= 10*12= 120 months Let the instalment be X 100000= X*Annuity factor(1.083%, 120months) 100000= X* 66.99 X= 1492.76
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