Asked by Yuzuna Tanaka on Jul 14, 2024
Verified
Beth borrowed $5,000 on demand from Canada Trust on February 23 for a Registered Retirement Savings Plan (RRSP) contribution. Because she used the loan proceeds to purchase Canada Trust's mutual funds for her RRSP, she received a special interest rate of prime plus 0.5%. Beth was required to make fixed monthly payments of $1,000 on the 15th of each month, beginning April 15. The prime rate was initially 4.75%, but it jumped to 5% effective June 15 and increased another 0.25% on July 31. (It was not a leap year.) Construct a repayment schedule showing the amount of each payment and the allocation of each payment to interest and principal.
Registered Retirement Savings Plan
A government-approved program in Canada that enables residents to save for retirement on a tax-deferred basis.
Fixed Monthly Payments
Regular, unchanging payments made each month for a period of time, often used in loans and lease agreements.
- Analyze the impact of fluctuating interest rates on loan repayment schedules.
Verified Answer
SB
Learning Objectives
- Analyze the impact of fluctuating interest rates on loan repayment schedules.
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