n Learning and Teaching Mathematics - Finance mathematics - missed annuity payments

Volume 2015, Issue 18
  • ISSN : 1990-6811


A typical Advanced Programme Mathematics finance question asks learners to deal with a scenario where a series of annuity payments is missed from a loan amortization. By way of example, consider the following question:

Mario borrows R200 000 from a bank at an interest rate of 7% per annum, compounded monthly, for a period of 25 years. He makes his first repayment at the end of the first month. Due to unforeseen circumstances he is unable to make his loan repayments for the entire 11th year. However, Mario is determined to finish paying back the loan within the original agreed term (i.e. 25 years) and consequently needs to increase the repayment amount (starting in the 12th year) to take into account the twelve missed payments.

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