Chapter 2

Activities
Some of the following activities require information from a bank (s). discuss with your teacher
the most statisfactory way of obtaining the information.
a. find the current interest rate for the following types of loan:
Type of loan
% interest rate
Cheque account
Bussiness loan under $ 100,000
Bussiness loan over $ 100,000
Credit card
Investigate the costs associated with each type of loan
b. the bank lends the money have deposited in their account. It must pay interest to those
depositors. What are the current interest rates on the on the following deposits account ?
Type of account
% interest rate
Passbook saving account
Statement saving account
Term deposit
c. the bank is a business that aims to make a profit. Using your answer to (a) and (b) explain
how bank make profit?
Credit, services fee
.............
d. wages and salaries are one of the cost or operating that banks have to pay. List six other
cost.
1.
4.
2.
5.
3.
6.
e. the table below shows a number of details related to loans of variying amounts at an
interest rete of 18%

Personal Repayment Chart

Amount
Finances $
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
12.000
13.000
14.000

Annual Percentage Rate 18.00

Repaid over 2 years
Repaid over 3 years
Credit
Monthly
Credit
Monthly
Charge $
Inst. $
Charge $
Inst. $
393.40
99.85
602.80
72.30
594.48
149.77
904.56
108.46
792.80
199.70
1.205.96
144.61
990.88
249.62
1.507.36
180.76
1.188.96
299.54
1.808.76
216.91
1.387.28
349.47
2.110.52
253.07
1.585.36
399.39
2.411.92
289.22
1.783.68
449.24
2.713.32
325.37
1.981.76
499.24
3.014.72
361.52
2.180.08
549.17
3.316.48
397.68
2.378.16
599.09
3.617.88
433.83
2.576.24
649.01
3.919.28
469.98
2.774.56
698.94
4.220.68
506.13

Repaid over 4 years

Credit
Monthly
Charge $
Inst. $
820.00
58.75
1.229.76
88.12
1.640.00
117.50
2.049.76
146.87
2.460.00
176.25
2.869.76
205.62
3.280.00
235.00
3.689.76
264.37
4.100.00
293.75
4.509.76
323.13
4.920.00
352.50
5.329.76
381.87
5.740.00
411.25

If a person borrows $2,000, and repays the loan over two years, there will be 24 monthly
installment at $99.85

What was the total amount of interest that they had to pay? $...............................
How much will they repay in total ?
$...............................
How much would the loan have cost them if they repaid it over these years, or four
years? $.....................................over 3 years
$.....................................over 4 years

f. give an adventage and disadvantage of repaying a loan over a longer rather than shorter
period of time.

PERSONAL LOAN CASE STUDIES

Income
Income after tax

Total Income

Expenses
$

Rent
Living Expense
Car repayment
Personal loan
repayment
(devide the monthly repayment by 4

Having completed Arthurs budget, what recommended would you make to your bank
maneger? Give reasons

Peter savage
Peter, who is 19 years of age, has not been in regular employement, but his present job is that
of a part-time brick cleaner. He is already repaying a losn from a finance company at $40 per
week. His present income is $ 180 per week (after tax). He has little saving (currently $211),
although he hass banked with the ABA Bank since opening an account when he was in primary
school. He wants to purchase a motorcycle ($3200) for which he is prepared to pay the $200
deposit. He lives at home, for which he is charged $30 per week board. Peter estimate that is
living expense (excluding finance company repayments and board) are $75 per week.
1. what would peters bankbalance after paid the $200 on the motorcycle?
$........................................................................................................................................................

2. what advice would you give to Peter in relation to the purchase of the motorcycle at this
time?

3. what other expenses would he have if he purchased the motorcycle?

4. how much would Peter be required to pay per week if he borrowed $3.000 for four years,
according to the loan repayment table?
$........................................................................................................................................................
5. prepare Peters weekly budgets, assuming that he did receive the loan for $3.000 over four
years .
Income

Expenses

6. having completed Peters budget, what recommendation would you make to your bank
manager ? give reason

.
Activities
You have been promoted to the position of bank manager for the ABA bank. Part of your job is
to interview applicants for housing loan to asses wether they should be provided with finanace.
List five factors you would consider when deciding whether or not approve the loan.

2.

Character is the state of nature from customers. Both in personal life and in business
environment.

3.

Capacity is the ability to have prospective customers in running their business in order t
o obtain the expected profit

4.

collateral is delivered the goods as collateral against the loan customer receives.

5.

Condition of economy is the situation and the political, social, economic, cultural,
circumstances affecting the economy at a time that likely affect the smoothness of
debtor comparison.

Activities
a. In march 1987 the bank housing loan interest rate for new loans was 15.5%

If you borrowed $1.000 for twenty years, what wouls your annual repayment be?
$................................................................................................................................
How much is this per week?

How much you will repay over the twenty years for this initial $1.000 loan?

b. in practice, the amount borrowed on a housing lian will not be aslow as $1.000. assume that
you borrow $ 40.000 for twenty years, at 15.5%

How much are your annual repayments?

How much is this per mounth?

How much is this per week?

..
How much will you repay over the twenty years for the initial loan of $ 40.000