Question

Chris takes out a loan of $150 000 over 20 years at 8.5% p.a. interest compounded monthly to renovate his home. His monthly repayments are set at $1301.74. The outstanding balance of the loan after 1 year is $147 014.60. After 1 year, Chris receives $55 000 compensation for a work-related accident. He deposits the money in his loan’s offset account for 1 month while he decides what to do with it.

a) Calculate the interest saved during the 1 month in which the $55 000 is deposited in the offset account. [2]

b) Calculate the outstanding balance at the end of the month. [4]

c) Calculate how long it will take Chris to repay the remainder of the loan. [3]

d) Calculate how many months sooner will Chris finish repaying the loan.

Answer 1

Here as we have deposited the 55000 into the loan account for the one month that simply means in that month we have paid installment+interst amount on the loan.

=

Formulas Used :-

Interest on 55000

=55000*8.5%/12

b)	No.	opening balance	installment	Interest	Principal	Closing Balance
	13	147014.6	=1301.74+D2	=C5*8.5%/12	=D5-E5	=C5-F5

time reqired to pay remaining loan

=NPER(8.5%/12,1301.74,-G5)

Normal months remailning	=NPER(8.5%/12,1301.74,-C5)
sooner the loan paid	=D9-D7