Financial Maths, STD2 EO-Bank 20

Noah takes out a reducing balance loan of $10 000 to renovate his bathroom. The loan has an interest rate of 6% per annum and Noah makes monthly repayments of $400.

The spreadsheet shown models the first 4 months of the loan.

Complete the missing values for cells C10, B11 and E11. (3 marks)
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Calculate the total interest Noah pays over the first 4 months of the loan. (1 mark)
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Show Answers Only

a. $\text{C10} = \$46.49$

$\text{B11} = \$8944.74$

$\text{E11} = \$8589.46$

b. $\$189.46$

Show Worked Solution

a. $\text{Monthly interest rate} = \dfrac{6\%}{12} = 0.5\%$

$\text{C10 (Month 3 interest)} =9298.25 \times 0.005 = \$46.49$

$\text{B11 (Month 4 start)}=9298.25+46.49-400=\$8944.74$

$\text{E11 (Month 4 end)}=8944.74+44.72-400=\$8589.46$

b. $\text{Total interest} = 50+48.25+46.49+44.72=\$189.46$