Question

present value = 500 000

A bank offer interest rate of 9% p.a compounded quarterly for first 5 years.
Rate after first 5 years is the reduce to 7.5% per year compounded monthly.

Calculate new monthly payment after 5 years assuming company wants to keep total term of loan at 20 years.

Answer 1

What level of math is this?

Answer 2

Is no monthly payment made for the first 5 years?

Answer 3

its financial math

Answer 4

not sure im new to this

Answer 5

There are infinite solutions if you allow two different monthly payments for each period.

Answer 6

The remaining principal of a loan after \(t\) months is given by the equation:
\[
P_t= P_0r^t-m\left(\frac{1-r^t}{1-r}\right)
\]Where:
\(P_0\) is the initial principal
\(r\) is the monthly interest rate
\(m\) is the monthly payment

Answer 7

This equation can help you if you split it up.

Answer 8

It can only be solved if we know the monthly payment for the first 5 years or know that it is the same.

But they said 'new monthly payment' so I assume it is different.

Answer 9

Maybe I'm misinterpreting this question.

Doesn't anyone else understand the question better? Is there anyone out there?

Answer 10

i read it as more of an adjustable rate loan

determine the payments for a 25 year fixed rate, balance that out for 5 years to determine the remaining payment amount for the remianing 20 years

Answer 11

if we use the wio formula syntax :)

\[P_0r^{4t}~\frac{1-r}{1-r^{4t}}=m\]
where r=1+.09/4

Answer 12

run that for 4*5 periods to determine the balance to refinance ...

Answer 13

i dont understand :(