A farmer borrows $80 000 to purchase new machinery.

The interest is calculated monthly at

the rate of 2% per month, and is compounded each month.

The farmer intends to repay the loan with interest in two equal annual instalments of $M
at the end of the first and second years.

(i) How much does the farmer owe at the end of the first month? 1

(ii) Write an expression involving M for the total amount owed by the farmer after 2
12 months, just after the first instalment of $M has been paid.

(iii) Find an expression for the amount owed at the end of the second year and deduce that 2
24
80 000 x ( 1.02 )
M- 12
- (1.02) + 1

(iv) What is the total interest over the two year period? 2
201s 2t: St Georse Girls

Georgina borrows $650 000 to purchase her first home. She takes out a loan over
30 years, to be repaid in equal monthly instalments. The interest rate is 5.4% per
annum reducible, calculated monthly.

(i) Show that the amount, $An, owing after the nth repayment is given by the
formula: 2

2 11 1
An= 650 000(1.0045)" - M ( I + 1.0045 + 1.0045 + ...... + 1.0045 - )

(ii) Find the monthly repayment required to repay the loan in 30 years. 2

(iii) Georgina wants pay the loan off in less than 30 years. If she can afford to pay
$5 000 per month, how many months will it take her to pay off the home
loan? 2

(iv) How much will Georgina save in interest if she pays $5 000 per month? 1
B• ulkh= Hills 2008 2U Tri.ls

Pocholo repays a loan over a period of n months. He repays $I 49 in the first

month, $147 in the second month, $ 145 in the third month, and so on.
51
(i) How much does Pocholo repay in the 21 month? 2
(ii) How much in total has Pocholo repaid in the first 21 months? I
(iii) Pocholo repays a total of $5000. How many repayments does he make? 2