This preview shows pages 1–2. Sign up to view the full content.

Answers Question 1 - (12 marks) The Stepford family purchased a duplex in western Sydney four years ago for \$395,000. They paid a \$15,000 deposit and financed the balance through a mortgage repayable over 25 years which required equal payments to be made at the end of each month. At that time there was an interest rate of 5.5% p.a. compounded monthly. (a) What were the original mortgage payments? A = 395,000 - 15,000 = 380,000 (0.5 marks) 3 00458 . 0 12 055 . 0 = = r (0.5 marks) ( ) ( ) 300 25 12 300 380,000 0.004583 1 1.004583 \$2,333.53 n R =×= = =  (1 mark) Today the Stepford family has just been advised that the interest rate is to increase to 7.0% p.a. and that interest will be compounded daily. The family has been given the choice of two options to continue paying the mortgage. Option 1: Make higher monthly payments for the remaining 21 years. Option 2: Continue the same payments but extend the period of the loan. (b) What is the amount of each new payment under Option 1? 90 . 303 , 348 3 00458 . 0 ) 3 00458 . 1 ( 1 53 . 2333 . . 252 = = O P (1 mark) 005850 . 0 1 365 07 . 0

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.