### this loan product requires customers to make monthly repayments payments will be mad 3521943

Today is 1 January 2019. MQU bank is offering a 18 year \$1,500,000 loan product from the beginning of 2019 to its customers.(25 marks).

1. [12 marks] This loan product requires customers to make monthly repayments. Payments will be made at the beginning of each month with an amount of \$9,000. Use theGoal Seekto find the implied annual nominal rate of interest payable monthly (i.e.,j12) charged by MQU bank. Assume that there is an annual fee of \$500 paid on 1 January of each year for the first 10 years (the first one is paid on 1 January 2019) and there is an annual fee of \$1000 paid on 1 July of each year for the remaining term of the loan. The first loan payment is made today.

2. [10 marks] For this loan product, each customer has an option to choose a 3-year interest-only period.

Here is the option detail

• – Customers can borrow \$1,500,000 on 1 January 2019 and make the re- payments that only cover the interest on the borrowed amount (i.e., \$1,500,000) during the interest-only period (i.e., first three years). The interest rate isj12= 6% for the interest-only period.

• – After the interest only period, customers’s repayments will be paid at the beginning of each month with an amount of \$9,500 for the remaining 18-3 years.

• Assume that there is an annual fee of \$700 paid on 1 January of each year during the loan term (i.e., 18 years). The first one is paid on 1 January 2019

Calculate the monthly repayment amount for the interest-only period and use theGoal Seekto find the implied annual nominal rate of borrowing cost payable monthly (i.e.,j12) charged by MQU bank.

c. [3 marks] Based on the result of part b, find the following equivalent nominal interest rates:j2,j4andj365. Use a bar or column chart to plot these rates.