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ACST201 Financial Modelling

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  • Course Code: ACST201
  • University: Macquarie University
  • Country: Australia

Question:

Today is 1 January 2018. MQU bank is o?ering a 5 year $100,000 loan product to its customers

  1. This loan product requires customers to make monthly repayment. Payment will be paid at the beginning of each month with an amount of $2,000. Use the Goal Seek to find the implied annual nominal rate of interest payable monthly (i.e., j12) charged by MQU bank.

  2. For this loan product, each customer needs to pay an initial cost of $200 at the beginning of the loan. Use the Goal Seek to find the real borrowing cost for a customer (expressed as an annual rate payable monthly j12). This loan product requires customers to make monthly repayment. The payment will be paid at the beginning of each month with an amount of $2,000.

  3. Assume that customers also have the yearly, half yearly and quarterly payment options. Using these options, customers are required to have payment at the end of each period (i.e., at end of each year, half-year and quarter). Assume that the MQU bank charges an annual nominal rate of interest j1= 7.5% p.a. for these payment options. Find the customer’s quarterly, half yearly and yearly payment amount. Use a bar or column chart to plot the quarterly, half yearly and yearly payment amount.
 

Answer:

Part A:

Calcualtion of Implied annual nominal rate
Annual Borrowing 100000
Number of payment 60
Monthly Payment 2000
Compounding Periods per year 12
Total Duration of Loan 5
Interest Rate 7%
 
Goal = Monthly Repayment to 2000
 
Annual Borrowing 100000
Number of payment 59
Compounding Periods per year 12
Interest Rate 7%
Monthly Payment 2000

 Part B

Calcualtion of Annual Borrowing
Annual Borrowing $100,000.00 
Number of payment 60
Monthly Payment 2000
Compounding Periods per year 12
Interest Rate 7%
Total Duration of Loan 5
Intital Borrowing Cost 200
 
Annual Borrowing Cost Year wise
1st Year $23,928 
2nd Year to 5th Year $98,417 
Real Borrowing Cost $122,344 
 
Goal = Annual borrowing cost is 100000
1st Year 23928
2nd Year to 5th Year 76072
Real Borrowing Cost 100000

Part C

Calcualtion of Yearly Payment Amount
Annual Borrowing 100000
Number of payment 60
Monthly Payment $2,004 
Compounding Periods per year 12
Total Duration of Loan 5
Interest Rate 7.5%
 
Calcualtion of half yearly Payment Amount
Annual Borrowing 100000
Number of payment 30
Monthly Payment $3,666 
Compounding Periods per year 6
Total Duration of Loan 5
Interest Rate 7.5%
 
Calcualtion of Quarterly Payment Amount
Annual Borrowing 100000
Number of payment 15
Monthly Payment $7,005 
Compounding Periods per year 3
Total Duration of Loan 5
Interest Rate 7.5%
 
 
Mode of Payment Monthly Payment
Yearly Payment $2,004 
Half Yearly Payment $3,666 
Quarterly Payment $7,005 
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