Question

As a small software developer firm, you have approached the AXZ Bank to obtain a term loan so that the firm can purchase a new server. The AXZ bank provides two (2) offers to your company, as listed below: a) a loan of $100,000 over a five (5) year period at an interest rate of 7.65% per annum (per year) payable at the end of each month. b) a loan of $100, 000 over a three (3) year period at an interest rate of 5.5% per annum (per year) payable at the end of each month. Requirements 1. Calculate the monthly loan instalments for each offer listed above – a) and b). 2. Calculate the total interest payments for each offer listed above – a) and b). (Note – Students must clearly provide all workings and calculations in their response)

Answer 1

Requirement 1 Monthly Installment
(A)
	P	=	100000*0.0068
			1-{1+0.00638}^-60
	Monthly Loan Installment	=	2011.22
(B)
	P	=	100000*0.00458
			1-{1+0.00458}^-36
	Monthly Loan Installment	=	3019.41
Requirement 2 Total Interest
Sr. No	Particulars	Option (A)	Option (B)
1	Total Installment	1,20,673	1,08,699
2	Loan Amount	1,00,000	1,00,000
3	Interest (1-2)	20,673	8,699