Ms. Caterina Weldon has applied for a loan from a local bank and the bank has...

Ms. Caterina Weldon has applied for a loan from a local bank and the bank has agreed to extend to her a personal loan of $ 1,500,000/= over a period of 2¹/₂ years. This loan will be repaid in monthly installments at the end of each month over the loan period. The proposed interest rate is 14.5% p.a.

Required:

Prepare a loan repayments schedule for Ms. Matemo’s loan indicating:

The Model Drivers
The constant payment
Interest payment
Principal payment, and
The principal balance
Compute the total interest payable by the end of the loan period?

Expert Solution

Given proposed interest rate is 14.5% per annum.

The formula for calculating the monthly equalised installments is.

[P x R x (1+R)^N]/[(1+R)^N-1], where P stands for the loan amount or principal, R is the interest rate per month

Now the monthly interest rate is 14.5/12 = 1.208333%

Accordingly the monthly equalised installment amount as per the above formula is .

(15,00,000 * 0.01208333 * (1.01208333)^2.5*12)/((1.01208333)^2.5*12-1)

= 15,00,000 * 0.03993802 = 59907.

Hence monthly installment is 59907.

The amortization schdeule is as below

Months	Opening Balance	Interest monthly @1.208333%	Equalised Payment monthly	Principal amount in equalised payment	Balance Principal
1	15,00,000	18125.00	59907.00	41782.01	14,58,218
2	14,58,218	17620.13	59907.00	42286.87	14,15,931
3	14,15,931	17109.16	59907.00	42797.84	13,73,133
4	13,73,133	16592.02	59907.00	43314.98	13,29,818
5	13,29,818	16068.63	59907.00	43838.37	12,85,980
6	12,85,980	15538.92	59907.00	44368.08	12,41,612
7	12,41,612	15002.81	59907.00	44904.19	11,96,708
8	11,96,708	14460.21	59907.00	45446.79	11,51,261
9	11,51,261	13911.07	59907.00	45995.93	11,05,265
10	11,05,265	13355.28	59907.00	46551.72	10,58,713
11	10,58,713	12792.78	59907.00	47114.22	10,11,599
12	10,11,599	12223.48	59907.00	47683.52	9,63,915
13	9,63,915	11647.31	59907.00	48259.69	9,15,656
14	9,15,656	11064.17	59907.00	48842.83	8,66,813
15	8,66,813	10473.99	59907.00	49433.01	8,17,380
16	8,17,380	9876.67	59907.00	50030.33	7,67,350
17	7,67,350	9272.14	59907.00	50634.86	7,16,715
18	7,16,715	8660.30	59907.00	51246.70	6,65,468
19	6,65,468	8041.07	59907.00	51865.93	6,13,602
20	6,13,602	7414.36	59907.00	52492.64	5,61,110
21	5,61,110	6780.07	59907.00	53126.93	5,07,983
22	5,07,983	6138.12	59907.00	53768.88	4,54,214
23	4,54,214	5488.41	59907.00	54418.59	3,99,795
24	3,99,795	4830.86	59907.00	55076.14	3,44,719
25	3,44,719	4165.35	59907.00	55741.65	2,88,977
26	2,88,977	3491.81	59907.00	56415.19	2,32,562
27	2,32,562	2810.12	59907.00	57096.88	1,75,465
28	1,75,465	2120.20	59907.00	57786.80	1,17,678
29	1,17,678	1421.95	59907.00	58485.05	59,193
30	59,193	715.25	59907.00	59191.75	0

Now the total interest paid = 297211.66

jeff jeffy answered 1 year ago

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