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Solve the new monthly repayment

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Reference no: EM132969647

Fatima bought a house three years ago that cost $750,000. She had 20% deposit and borrowed the rest from Westpac Bank at a rate of 7.2% per annum, compounded monthly, for 10 years.

Westpac Bank has now notified Fatima that after the last monthly payment for the third year, the interest rate on her loan will increase to 9.6% per annum, compounded monthly, in line with market rates. Also from the first month of the fourth year of her loan, Fatima can either increase the monthly repayment (so as to pay off the loan by the originally agreed date), or she can keep paying the same original monthly repayment and extend the term of the loan.

Problem 1: Calculate the new monthly repayment if Fatima wants to pay off the loan by the originally agreed date. (Show answer correct to the nearer cent.)

Problem 2: Calculate the extra period added to the term of the loan, if Fatima keeps on paying the original monthly repayment. (Show answer in months, correct to four decimal places.)

Reference no: EM132969647

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