Reducing balance loans

9C
Learning Intention
› To be able to use the Finance Solver on your CAS to
analyse reducing balance loans.
Finance Solver on CAS
Putting numbers into the financial solver
In general terms:
- If you receive money, or are owed money this is positive (+)
- If you pay money, or owe money this is negative (-)

- Payments against a loan are always negative

- Negative FV indicates that money is still owed on the loan
An example
David borrows $134,900 at an interest rate of 13.5%
compounding monthly to purchase a Tesla Model X.
The loan has to be repaid over five years. David plans to
pay $2000 every month and pay the remaining total at the
end of the loan period.
Ignoring the fact that this is a terrible financial decision, if
David were to follow this plan, how much would he owe at
the end of the loan?
Solution
Your turn:
Go to www.domain.com.AU (not realestate.com), find a
house or apartment that you like, and find the price.
Information:
Mortgages (home loans) tend to run for a period of 30
years, with payments made every fortnight (two weeks).
1) Assuming that the average interest rate over the course
of your loan is 5.5%, how much would you have to pay
each fortnight over the course of your loan, so that it is
fully paid off after the 30 years?
2) What is the total amount that you would have to pay for
the home over the course of the loan?
QUESTION LIST
Ex. 9C:
Qns 1ace, 2ace, 3-6