- This topic has 1 reply, 2 voices, and was last updated 10 years ago by
.
- Posts
Jegede purchased a house for #30 million. He negotiated for a 15 years mortgage with MBA Mortgage Investment and Company Limited at 21% interest charge (compounded monthly). It is however envisaged that Jegede could secure a mortgage at 14% from First Savings and Loans Limited in five year’s time. How much will Jegede have to pay monthly to First Savings and Loans Limited to liquidate the debt?
I don’t know where you found this question (and presumably you have an answer in the same book in which you found the question), but it is not the type of question that is asked in Paper F9.
Also, you need to know whether or not they are repaying anything to MBA during the first 5 years. If they are not paying anything, then the amount owing to MBA after 5 years will be 30M x (1+R)^5, where R is the equivalent annual interest rate.
When you know the amount owing to MBA then to get the monthly payment you will have to divide the amount by the annuity factor for 120 periods at the equivalent monthly interest rate (equivalent to 14% per annum).
However, again, this could not be asked in Paper F9. The lectures on interest and discounting for Paper F2 will help you (even though this would not be asked in Paper F2 either 🙂 )
- You must be logged in to reply to this topic.