Question

Mzomuhle takes out a personal loan of R439200,00 to help finance the building of his holiday house.The terms of his loan specify equal three-monthly repayments over five years, with13,2% interest per annum, compounded quarterly.The first payment is made three months after the loan was taken out. First find the size of the three-monthly payments.Then considering the amortisation schedule,find the total interest charged over the first year of repayments.

Answer 1

We will find it by the formula:

$А=S\times(\dfrac{r}{(1+r)^n-1})$

S= 439 200

Since the payment is quarterly, we will change the rate and the number of periods accordingly

$r=\dfrac{0.132}{4}=0.033$

$n=4\times5=20$

$А=S\times(\dfrac{r}{(1+r)^n-1})=439 200\times(\dfrac{0.033}{(1+0.033)^{20}-1})=15 852.40$