Repayment of a home loan in the future

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Mr Zhang has residual income of $75,000 per year which he can put toward the repayment of a home loan in the future. Mr Zhang's Bank insists that he needs to set aside a buffer of 45% of this amount in case interest rates rise or emergencies occur. Assume annual compounding for the following scenarios.

-If the current Fixed interest rate is 2.8% and the term is for 30 years, how much is his bank able to lend to him? Use annual compounding in your calculation.

-Assume that Mr Zhang finds a studio apartment for $380,000 that he is willing to buy. What would his annual minimum repayment be? Would this increase or decrease his buffer and to what percentage? Assume the same loan terms and 30% deposit finance

Reference no: EM133057568

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