Apps. and Interpretation for IBDP Maths Ebook 1 | Page 94

Your Practice Set – Applications and Interpretation for IBDP Mathematics
27
Paper 2 – Amortization
Example
Young Jae is going to buy a flat. He is suggested to choose one of the two options to
repay the loan of 250000 USD with a nominal annual interest rate of 9%:
Option 1: A total of 240 equal monthly payments have to be paid at the end of each
month
Option 2: A monthly payment of 2000 USD has to be paid at the end of each month until
the loan is fully repaid
(a)
If Young Jae selects the option 1, find
(i)
(ii)
the amount of monthly payment,
the total amount to be paid,
(b)
(iii)
the amount of interest paid.
If Young Jae selects the option 2, find
[7]
(i)
(ii)
the number of months to repay the loan,
the total amount to be paid,
(c)
(d)
(iii) the amount of interest paid.
[7]
By considering the amounts of monthly payment in both options, state the better
option for Young Jae and explain the answer.
[2]
By considering the amounts of interest paid in both options, state the better option
for Young Jae and explain the answer.
[2]
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