2(f) Abdul bought a house for £450,000. He put down a deposit of £150,000 and took out a mortgage repayable over 25 years for the balance. Under the terms of his mortgage Abdul has a variable rate of interest which is currently 4.1% APR. Assuming mortgage interest is calculated monthly and the variable rate does not change, estimate Abdul’s monthly mortgage payments using the formula:
A = P (i + i )
(1 + i)n – 1
2(g) Chris is 26 years old, employed, and saving up to buy a house. Chris needs to stay on track with his finances and has asked you to assist him to prepare a personal financial plan (i.e. a cash budget). He has supplied the following information to help you:
1. Chris earns an annual gross salary of £30,000. From this PAYE of £3,200, NIC of £2,564 and employee pension contributions of £1,500 are deducted for the year. Chris’ net salary (i.e. his take-home pay) is paid on the last working day of each month.
2. Chris makes a small amount of money by selling goods on eBay. Although the amount does vary month-on-month, for the purposes of the financial plan Chris believes that an estimate of £150 income per month is reasonable.
3. Chris currently lives in a rented apartment with his friend. His monthly rent is £1,200 and household bills, which are split equally between Chris and his friend, total £200.
4. Home contents insurance is £60 per annum. Chris renews this insurance annually and the next annual payment is due in August 2020.
5. On 1 October 2019 Chris took out a personal loan of £7,000 to buy a second-hand car. The loan is repayable in quarterly instalments of £400 (on 31 December, 31 March, 30 June and 30 September each year).
6. Chris pays car insurance of £600 annually in November of each year.
7. Chris estimates that his weekly living costs are approximately £100.
8. Chris puts £250 per month into a cash ISA. The savings he has accumulated in this ISA are for the deposit on a house.
9. On 1 July 2020 Chris had a balance of £2,100 in his bank account.
Prepare a personal financial plan (i.e. cash budget) for Chris for the six months from 1 July to 31 December 2020 in a table. Show each month separately. Where relevant assume there are four weeks in a month. Use Chris’ bank balance at 1 July 2020 as your starting point.