sept 2008 exam Q 12

[skhurana]

Hi there,

I am bit confused on Q12 of Sept 2008.

In the first part the appraoch that has been used to solve the question is by taking monthly effective rate of interest as the interst payments are made monthly.

I though thought that I can also do it by taking a yearly int payment and then in the annuity formula use i(p) at the bottom to solve.

But this didnt come up with the right answer.

Can anybody help.

KindRegards

 

[John Lee]

I'm a bit confused. It is an "interest only" loan not the usual repayment loan. Therefore you just need to calculate the interest paid each month. You don't need an annuity.

 

[skhurana]

Hi John,

Thanks for your reply. I kind of get the idea afterwards but wasnt very sure so waited for somebody to reply.

Many thanks

Sarika

 

[Montgomery]

Part 2

Hi

CAn you please explain me the logic behind X S (6)/30

I understand 30 is because of the 6 month payment . so 2 payments /yr = 2x15=30

but S(6), why are we using the bi monthly d^6 interest rate here..

Tutors please help, other's comments will be appreciated too.

Regards
Montgomery

 

[John Lee]

Hi

CAn you please explain me the logic behind X S (6)/30

I understand 30 is because of the 6 month payment . so 2 payments /yr = 2x15=30

but S(6), why are we using the bi monthly d^6 interest rate here..

Tutors please help, other's comments will be appreciated too.

Regards
Montgomery

the examiners are working in half-years and there are 6 months in half a year.

We used s(12)/15 in the ASET.