A BCom graduate bought a small apartment for R151 000.00 with a down payment of R45 000.00. The graduate secures a mortgage bond with a bank for the balance at 15% per annum, compounded monthly, with a term of 20 years. What are the monthly payments? A.R671.56B.R1 316.79 C.R1 395.80 D.R1 988.35
Question
A BCom graduate bought a small apartment for R151 000.00 with a down payment of R45 000.00. The graduate secures a mortgage bond with a bank for the balance at 15% per annum, compounded monthly, with a term of 20 years. What are the monthly payments? A.R671.56B.R1 316.79 C.R1 395.80 D.R1 988.35
Solution
To solve this problem, we first need to calculate the loan amount, which is the total cost of the apartment minus the down payment.
The total cost of the apartment is R151,000.00 and the down payment is R45,000.00.
So, the loan amount = R151,000.00 - R45,000.00 = R106,000.00
The interest rate is 15% per annum, compounded monthly. So, the monthly interest rate is 15%/12 = 1.25% or 0.0125 in decimal form.
The term of the loan is 20 years, so the total number of payments is 20*12 = 240 months.
We can use the formula for the monthly payment on a loan, which is:
P = [r*PV] / [1 - (1 + r)^-n]
where: P is the monthly payment r is the monthly interest rate PV is the present value or loan amount n is the total number of payments
Substituting the values into the formula, we get:
P = [0.0125*R106,000.00] / [1 - (1 + 0.0125)^-240]
Calculating the above expression will give us the monthly payment.
Please note that the actual calculation might require a financial calculator or a software tool that can handle such calculations.
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