Question

In: Finance

You are planning to borrow OMR 3,500. You can repay the loan in 40 monthly payments...

You are planning to borrow OMR 3,500. You can repay the loan in 40 monthly payments of OMR 103.25 each or 36 monthly payments of OMR 112.94 each. You decide to take the 40-month loan. During each of the first 36 months you make the loan payment and place the difference between the two payments (OMR 9.69) into an investment account earning 10% APR. Beginning with the 37th payment you will withdraw money from the investment account to make your payments. How much money will remain in the investment account after your loan is repaid?

Solutions

Expert Solution

Assumption: Loan Installment will be paid at the END of the month and therefore, Deposit will also be made at the end of the month.

Net Wothdrawal fron 37th year onwards = 103.25-9.69 = 93.65

Month Deposit/(Withdrawal)
[beginning of period]
Opening Balance
[Previous Closing+/-Deposit/Withdrawal]
Interest
[Opening Balance*(0.00833)]
Closing Balance
[Opening Balance+Interest]
Deposit/(Withdrawal)
[end of period]
0
1 0 0 0 9.69
2 9.69 0.0807177 9.7707177 9.69
3 19.4607177 0.162107778 19.62282548 9.69
4 29.31282548 0.244175836 29.55700131 9.69
5 39.24700131 0.326927521 39.57392884 9.69
6 49.26392884 0.410368527 49.67429736 9.69
7 59.36429736 0.494504597 59.85880196 9.69
8 69.54880196 0.57934152 70.12814348 9.69
9 79.81814348 0.664885135 80.48302862 9.69
10 90.17302862 0.751141328 90.92416994 9.69
11 100.6141699 0.838116036 101.452286 9.69
12 111.142286 0.925815242 112.0681012 9.69
13 121.7581012 1.014244983 122.7723462 9.69
14 132.4623462 1.103411344 133.5657575 9.69
15 143.2557575 1.19332046 144.449078 9.69
16 154.139078 1.28397852 155.4230565 9.69
17 165.1130565 1.375391761 166.4884483 9.69
18 176.1784483 1.467566474 177.6460148 9.69
19 187.3360148 1.560509003 188.8965238 9.69
20 198.5865238 1.654225743 200.2407495 9.69
21 209.9307495 1.748723143 211.6794727 9.69
22 221.3694727 1.844007707 223.2134804 9.69
23 232.9034804 1.940085991 234.8435664 9.69
24 244.5335664 2.036964608 246.570531 9.69
25 256.260531 2.134650223 258.3951812 9.69
26 268.0851812 2.233149559 270.3183307 9.69
27 280.0083307 2.332469395 282.3408001 9.69
28 292.0308001 2.432616565 294.4634167 9.69
29 304.1534167 2.533597961 306.6870147 9.69
30 316.3770147 2.635420532 319.0124352 9.69
31 328.7024352 2.738091285 331.4405265 9.69
32 341.1305265 2.841617286 343.9721438 9.69
33 353.6621438 2.946005658 356.6081494 9.69
34 366.2981494 3.051263585 369.349413 9.69
35 379.039413 3.15739831 382.1968113 9.69
36 391.8868113 3.264417138 395.1512285 9.69
37 404.8412285 3.372327433 408.2135559 -93.65
38 314.5635559 2.620314421 317.1838703 -93.65
39 223.5338703 1.86203714 225.3959075 -93.65
40 131.7459075 1.097443409 132.8433509 -93.65
41 226.4933509

Money remaining = $226.49


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