FMB assignment.docx - BBus4 Sneha Selvaraj 33057212 Foundational Mathematics for Business(Class C Name Sneha Selvaraj Murdoch ID 33057212 Kaplan ID

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BBus4 Sneha Selvaraj 33057212 Foundational Mathematics for Business (Class C) Name: Sneha Selvaraj Murdoch ID: 33057212 Kaplan ID: CT0261451 Lecturer: Lonas Lee 1 | P a g e
BBus4 Sneha Selvaraj 33057212 Question 1: Amortization is a term used in finance which refers to the process of allocating the cost of an intangible asset over a period of time. It is actually a repayment of lean principle over that time (Marcie 2011). Loan Amortization Schedule Column1 Borrowed Amount (A) \$500,000.00 n = 240 total number of periods Interest rate i 2% per annum i = 0.02/12 Compound frequency per year 12 i =0.0016667 monthly interest Term n 20 years Repayment R \$2,529.42 R= \$2529.4166752 regular payment i i A R n ) 1 ( 1 Where: A = present value (borrowed amount) R = annuity payment per period i = interest rate per period n = number of payments R = A [ 1 −( 1 + i ) n i ] R = 500000 [ 1 −( 1 + 0.0016667 ) 240 0.0016667 ] 2 | P a g e
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BBus4 Sneha Selvaraj 33057212 Payment Schedule for the First SIX Months: Payment Number Opening Payment Interest Principal paid Closing balance 1 \$500,000.0 0 \$2,529.42 \$833.33 \$1,696.08 \$498,303.92 2 \$498,303.9 2 \$2,529.42 \$830.51 \$1,698.91 \$496,605.01 3 \$496,605.0 1 \$2,529.42 \$827.68 \$1,701.74 \$494,903.26 4 \$494,903.2 6 \$2,529.42 \$824.84 \$1,704.58 \$493,198.69 5 \$493,198.6 9 \$2,529.42 \$822.00 \$1,707.42 \$491,491.27 6 \$491,491.2 7 \$2,529.42 \$819.15 \$1,710.26 \$489,781.00 Payment Schedule for the Last SIX Months : Payment Number Opening Payment Interest Principal paid Closing balance 235 \$15,088.36 \$2,529.42 \$25.15 \$2,504.27 \$12,584.09 236 \$12,584.09 \$2,529.42 \$20.97 \$2,508.44 \$10,075.65 237 \$10,075.65 \$2,529.42 \$16.79 \$2,512.62 \$7,563.03 238 \$7,563.03 \$2,529.42 \$12.61 \$2,516.81 \$5,046.21 239 \$5,046.21 \$2,529.42 \$8.41 \$2,521.01 \$2,525.21 240 \$2,525.21 \$2,529.42 \$4.21 \$2,525.21 \$0.00 Hence we can see that at the end of 240 th month the closing balance is \$0.00. 4 | P a g e
BBus4 Sneha Selvaraj 33057212 Part B: Floating rate: Floating interest rate is an adjustable or variable interest rate that can change from time to time during debt obligation ("Home Loans: Fixed Vs Floating Rates NDTV" 2017). Depending on the index interest rate will change. An exception is that floating rate is cheaper. Fixed rate: Fixed interest rate is an interest rate on loan or mortgage for which the rate of interest does not fluctuate over the entire term of the loan. The fixed interest rate doesn’t change for a specified duration ("Home Loans: Fixed Vs Floating Rates NDTV" 2017). Fixed rate is much better because of the stability of the payment over the period of time. Floating Rate Package for DBS: 5 | P a g e
BBus4 Sneha Selvaraj 33057212