Task 4 - Loans (Maximum 10 Marks)
A bank is considering giving a loan of £50 000 to a customer at a variable interest rate.
The rate used to find the initial payment is (N+1)% where N is the last digit of your ID
number.
The loan is repaid in annual instalments over a fixed number of years.
a) Using Excel, or otherwise, produce a table showing the annual repayment
amount for a range of repayment terms from 5 years up to 10 years inclusive.
You must show your working for at least one of the repayment terms.
The bank issued the loan for an original term of 5 years and the customer has just paid the
2nd payment.
With immediate effect from the 2nd payment the bank has decided to change the interest
rate charged to (N + 3)% where N is the last digit of your ID number.
b) Calculate the new annual payment and the increase in the total amount of
interest paid.
Learning Outcome
KU1) demonstrate
mathematical literacy by
consistently using correct
Mathematical notation,
terminology, conventions, and
relevant diagrams and graphs;
KU2) evaluate the strengths
and weaknesses of alternative
models and consequently of
any conclusions drawn;
SS4) solve a range of
business-related problems
either deterministically or
probabilistically as appropriate;
SS5) choose and apply
appropriate techniques in
algebra, and calculus in finding
a solution to a problem;
KE6) use a range of IT
packages, including
calculators, spreadsheets,
word processors and skills in
the analysis and solution of
business problems;
KE7) communicate their work
effectively, presenting their
solutions using an appropriate
medium.