International Mortgages & Loans: Education & Examination Guide

Education & Examination Guide
CONTENTS
EEG PART 1 - INTRODUCTION

EEG PART 2 – IBA EDUCATION GUIDE
EEG PART 3 – IBA PROGRAMME CURRICULUM
EEG PART 4 - PRACTICAL INFORMATION GUIDE
EEG PART 5A - ACADEMIC WRITING HANDBOOK
EEG PART 5B - PLAGIARISM POLICY
International
EEG PART 6 - EXAMINATION & GRADUATION BOARD REGULATIONS
EEG PART 7 - WORK PLACEMENT HANDBOOK
Mortgages & Loans

EEG PART 8 - GRADUATION ASSIGNMENT & FINAL PROJECT HANDBOOK
EEG PART 9 - EUROPEAN DIPLOMA SUPPLEMENT AND EXAMPLE OF DEGREE
EEG PART 10 - THE STUDENT CHARTER
EEG PART 11 - THE STUDENT CODE OF BEHAVIOUR
EEG PART 12 - GENERAL TERMS & CONDITIONS
EEG PART 12A - TUITION FEE POLICY
EEG PART 12B - CODE OF CONDUCT LANGUAGE WUAS
1
EEG PART 14 - HOUSING CONDITIONS & IMMIGRATION REGULATIONS
VALUE OF MONEY
International Mortgages and Loans
Revision of Time Value of Money

ent
Investment
tain Aamount ofof money
certain amount
moves forwards
ey moves forwards
Discount
t A certain amount of money
moves backwards
tain amount of
ey moves backwards
/ 2
Formulas
• !" = $" 1 + ' ( = !"(…
+,
• $" = -./ 0 = $"(…
0 +,
• '= −1 = '345(…
1,
9:
78 ;:
• 6 = 78 -./ = 6<5'(…

/ 3
With periodicity
• Semesterly basis: twice per year (f=2)

• Quarterly basis: four times per year (f=4)
• Monthly basis: twelve times per year (f=12)
' )·(
!" = $" % +
(
• Continously basis: twelve times per year (f=12)

!" = $" · +'·,

/ 4
Annuities
(&'()* +&
!" = $
((&'()*
(&'()* +&
," = $ (

/ 5
Loans and methods to pay them back
• All to be paid back in one single payment, at the end

• To pay only interests at the end of every period, and to pay back the
Loan at the end
• To pay periodical payments, each one of them with a constant
Amortization term
• To pay constant periodical payments

/ 6
MATHS OF FINANCE
Loans
All to be paid back in one single payment, at the end
L 0 0 0 P
0 1 2 3 n

/ 7
MATHS OF FINANCE
Loans – American Method
To pay only interests at the end of every period, and to pay back
the Loan at the end
L Int Int Int Int+Loan
0 1 2 3 n
Interests = Debt (L) · Interest Rate (r)

/ 8
MATHS OF FINANCE
Loans – German Method
To pay periodical payments, each one of them with a constant

Amortization term
L P1 P2 P3 Pn
0 1 2 3 n
A=L/n Interests = Debt (L) · Interest Rate (r)
P1=A+I1 I1=Debt during period1 * the interest rate applied during period1
P2=A+I2 I2=Debt during period2 * the interest rate applied during period2
Pn=A+In In=Debt during periodn * the interest rate applied during periodn

/ 9
MATHS OF FINANCE
Loans – French Method
To pay constant periodical payments
L P1 P2 P3 Pn
0 1 2 3 n
!· 1+! !
!=! !
!
1+! −1

/ 10
MATHS OF FINANCE
L P1 P2 P3 Pn
0 1 2 3 n
!· 1+! !
!=! !
!
1+! −1
What if you cannot pay the loan back for a certain number of
periods?
/ 11
MATHS OF FINANCE
Loans – Waiting period
You can negotiate with the bank that during the first couple of
periods (for example) you are not going to pay anything back.
And then, at the end of that waiting period, you start paying it.
-Loan. 0 0 P P P P P P P. … P
0 1 2 3 4 5 6 7 8 9 …n

/ 12
MATHS OF FINANCE
Example:
L = 50,000€
r1 = 6%
n = 10 years
the timeline of that example would be:

-50,000 0 0 P P P P P P P P
0 1 2 3 4 5 6 7 8 9 10
/ 13
MATHS OF FINANCE
The first step to be done is to find what is the existing debt with the bank after
that waiting period (after those periods during which you paid nothing back to
the bank)
What is your debt in that point?
Your debt in that point will be your debt in
point n=0 plus the interests that have been
generated over those two periods during
which you paid nothing
-50,000 0 0 P P P P P P P P
0 1 2 3 4 5 6 7 8 9 10
/ 14
MATHS OF FINANCE
Debt in point n=0 (Debt0): the Loan
Debt in point n: Debtn = Debt0·(1+r)n

so, in our case:
Debt2 = 50,000·(1+0.06)2 = 56,180
-50,000 0 0 P P P P P P P P
0 1 2 3 4 Education
5 & Examination
6 Guide 7 8 9 10
/ 15
MATHS OF FINANCE
De debt at the end of the waiting period is the amount you have to pay to the
bank. But now there are not 10 periods left to pay it back, because the first
two period have already passed. So you have to pay that debt back in only
eight remaining periods.
Debt2 = 56,180
P P P P P P P P
0 1 2 3 4 5 6 7 8 9 10
$·('($)* 1.13·('(1.13)4
formula: !=#
('($)* +'
= 56180
('(1.13)4 +'
= 9047
excel: =pmt(0.06;8;56180) = 9047

/ 16
MATHS OF FINANCE
So, the repayment table of that example would be:

P I A PD
0 50.000,00
1 0,00
2 0,00 56.180,00
3 9.047,00 3.370,80 5.676,20 50.503,80
4 9.047,00 3.030,23 6.016,77 44.487,03
5 9.047,00 2.669,22 6.377,78 38.109,25
6 9.047,00 2.286,56 6.760,44 31.348,81
7 9.047,00 1.880,93 7.166,07 24.182,74
8 9.047,00 1.450,96 7.596,04 16.586,70
9 9.047,00 995,20 8.051,80 8.534,90
10 9.047,00 512,09 8.534,90 0,00
/ 17
MATHS OF FINANCE
Actually, what it happened during that waiting period was:
P I A PD
0 50.000,00
1 0,00 3.000,00 -3.000,00 53.000,00
2 0,00 3.180,00 -3.180,00 56.180,00

/ 18
MATHS OF FINANCE
Loans – waiting period (unexpected waiting period somewhere in the
middle of the timeline)
Now, imagine that you started paying from the beginning, but after
having done your P3, you unexpectedly cannot pay your loan back.
You can negotiate with the bank that during the next couple of
periods (for example) you are not going to pay anything back.
And then, at the end of that waiting period, you start paying it
back again.
The first thing we’ll have to know is: What is my remaining
debt with the bank at the
beginning of that waiting
period?
/ 19
MATHS OF FINANCE

The timeline corresponding to this case would be:
-Loan. P P P 0 0 P P P P. … P
0 1 2 3 4 5 6 7 8 9 10

/ 20
MATHS OF FINANCE
The steps to solve this type of exercises are the following:

- The first payments are calculated as if that unscheduled waiting
$·('($)*
period was not going to occur != #
('($)* +'
- Then we identify the debt at the end of those first payments (at
the beginning of the waiting period)
- Then we find the debt at the end of the waiting period
- And finally we calculate the remaining payments keeping in mind
that the amount we’ll have to pay back is that new debt, and that
we’ll have less payments left to be done
/ 21
MATHS OF FINANCE
Let’s find the first payments

$·('($)* 1.13·('(1.13)89
formula: != # = 50000 = 6793.40
('($)* +' ('(1.13)89 +'
excel: =pmt(0.06;8;56180) = 6793.40
-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’
0 1 2 3 4 5 6 7 8 9 10

/ 22
MATHS OF FINANCE

Next step: let’s find the debt after having done those first payments:
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
so, the debt in this point is 37,923.34€
-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’
0 1 2 3 4 5 6 7 8 9 10
/ 23
MATHS OF FINANCE
Next step: let’s find the debt after the waiting period:
What is your debt in that point?

Your debt in that point will be the debt in
point n=3 plus the interests that have
been generated over those two periods
during which you paid nothing
-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’
0 1 2 3 4 5 6 7 8 9 10
/ 24
MATHS OF FINANCE

Debt in point n=3 (Debt3): 37,923.34
Debt in point n: Debtn = Debt0·(1+r)n

so, in our case:
Debt5 = 37,923.34·(1+0.06)2 = 42,610.66
-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’
0 1 2 3 4 5 6 7 8 9 10
/ 25
MATHS OF FINANCE

Finally, once we know the amount that has to be paid back and the
number of payments left to be done, we can calculate those payments:
$·('($)* 1.13·('(1.13)>
formula: !′ = # = 42,610.66 = 10115.62
('($)* +' ('(1.13)> +'
Debt5 = 42,610.66 excel: =pmt(0.06;5;42610.66) = 10,115.62
-50000. 6793.40 6793.40 6793.40 0 0. 10115.62 10115.62 10115.62 10115.62 10115.62
0 1 2 3 4 5 6 7 8 9 10
/ 26
MATHS OF FINANCE


P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
4 0,00 2.275,40 -2.275,40 40.198,74
5 0,00 2.411,92 -2.411,92 42.610,66
6 10.115,62 2.556,64 7.558,98 35.051,68
7 10.115,62 2.103,10 8.012,52 27.039,17
8 10.115,62 1.622,35 8.493,27 18.545,90
9 10.115,62 1.112,75 9.002,86 9.543,04
10 10.115,62 572,58 9.543,04
Education & Examination Guide 0,00
/ 27
MATHS OF FINANCE
L P1 P2 P3 Pn
0 1 2 3 n
!· 1+! !
!=! !
!
1+! −1
But what if you can pay your debt before the agreed period?
/ 28
MATHS OF FINANCE
Loans – Amortization in advance (Early repayment)
Example:
L = 50,000€
r1 = 6%
n = 10 years
$·('($)* ...0·('(...0)12
formula: != #
('($)* +'
= 50000
('(...0)12 +'
= 6743.40
excel: =pmt(0.06;10;50000)=6793.40

/ 29
MATHS OF FINANCE
So, the timeline of that example would be:
-50000 6793.40 6793.40 6793.40 6793.40 6793.40 6793.40 6793.40 6793.40 6793.40 6793.40
0 1 2 3 4 5 6 7 8 9 10

/ 30
MATHS OF FINANCE

P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
4 6.793,40 2.275,40 4.518,00 33.405,34
5 6.793,40 2.004,32 4.789,08 28.616,26
6 6.793,40 1.716,98 5.076,42 23.539,84
7 6.793,40 1.412,39 5.381,01 18.158,83
8 6.793,40 1.089,53 5.703,87 12.454,97
9 6.793,40 747,30 6.046,10 6.408,87
10 6.793,40 384,53 6.408,87 0,00
/ 31
MATHS OF FINANCE
Now, imagine that after having done your P3, you unexpectedly
receive a certain amount of money, and you want to completely
cancel your debt in advance.
The first thing we’ll have to know is: What is my remaining
debt with the bank?
-50,000 6793.40 6793.40 6793.40
0 1 2 3 4 5 6 7 8 9 10

/ 32
MATHS OF FINANCE
After P3, your remaining debt with the bank will be…
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
so, that’s the
3 6.793,40 2.531,14 4.262,26 37.923,34
amount you’ll have to pay
4 6.793,40 2.275,40 4.518,00 33.405,34 if you want to completely
5 6.793,40 2.004,32 4.789,08 28.616,26 cancel your debt
6 6.793,40 1.716,98 5.076,42 23.539,84
7 6.793,40 1.412,39 5.381,01 18.158,83
8 6.793,40 1.089,53 5.703,87 12.454,97
9 6.793,40 747,30 6.046,10 6.408,87
10 6.793,40 384,53 6.408,87 0,00
/ 33
MATHS OF FINANCE
So, if you amortize it all after P3, that will be:

P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 37.923,34 37.923,34 0

/ 34
MATHS OF FINANCE
Imagine, now, that after having done your P3, you unexpectedly
receive a certain amount of money, but that’s not enough to
completely cancel your debt. You can only partially cancel it.
Again, what we’ll have to know is: What is my remaining
debt with the bank?
-50,000 6793.40 6793.40 6793.40
0 1 2 3 4 5 6 7 8 9 10

/ 35
MATHS OF FINANCE
After P3, your remaining debt with the bank will be…
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
so, the amount
3 6.793,40 2.531,14 4.262,26 37.923,34
to be early amortized will
be subtracted from the
existing debt in that point

/ 36
MATHS OF FINANCE
After P3, if you amortize 20,000€ in advance:

P I A PD
0 50.000,00
that is your debt
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
after P3
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 20.000,00 20.000,00 17.923,34
and that’s
your new debt after that
amortization
that is what you amortize

/ 37
MATHS OF FINANCE
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 20.000,00 20.000,00 17.923,34
So, your debt has been reduced in 20,000€.

Usually the bank offers two options:
- Option A: To continue paying the same amount you used to pay before,
but finish paying before the initially agreed time
- Option B: To continue paying till the end of the initially agreed time, but
to reduce the amount of the remaining payments
/ 38
MATHS OF FINANCE
Option A: To continue paying the same amount you used to pay before, but
finish paying before the initially agreed time
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 20.000,00 20.000,00 17.923,34
4 6.793,40 1.075,40 5.718,00 12.205,34
5 6.793,40 732,32 6.061,08 6.144,26
If we had to continue the same way, the next line would be:
6 6.793,40 368,66 6.424,74 -280,48
Which is not logical to amortise more than the debt!

/ 39
MATHS OF FINANCE
Option A: To continue paying the same amount you used to pay before, but
finish paying before the initially agreed time. So, actually, line 6 will be:
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 20.000,00 20.000,00 17.923,34
4 6.793,40 1.075,40 5.718,00 12.205,34
5 6.793,40 732,32 6.061,08 6.144,26
6 6.512,92 368,66 6.144,26 0

/ 40
MATHS OF FINANCE
Option B: To continue paying till the end of the initially agreed time, but to
reduce the amount of the remaining payments
P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
so, that’s the amount
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
to be paid back, but in
extra 20.000,00 17.923,34
the 7 remaining periods
$·('($)* ...0·('(...0):
formula: !=#
('($)* +'
= 17923.34
('(...0): +'
= 3210.70
excel: =pmt(0.06;7;17923.34)=3210.70
/ 41
MATHS OF FINANCE
So, in case of Option B, the payback table would be:

P I A PD
0 50.000,00
1 6.793,40 3.000,00 3.793,40 46.206,60
2 6.793,40 2.772,40 4.021,00 42.185,60
3 6.793,40 2.531,14 4.262,26 37.923,34
extra 20.000,00 20.000,00 17.923,34
4 3.210,70 1.075,40 2.135,30 15.788,04
5 3.210,70 947,28 2.263,42 13.524,63
6 3.210,70 811,48 2.399,22 11.125,41
7 3.210,70 667,52 2.543,17 8.582,23
8 3.210,70 514,93 2.695,76 5.886,47
9 3.210,70 353,19 2.857,51 3.028,96
10 3.210,70 181,74 3.028,96 0,00

/ 42

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Education & Examination Guide

EEG PART 1 - INTRODUCTION

Mortgages & Loans

Revision of Time Value of Money

• !" = $" 1 + ' ( = !"(…

Education & Examination Guide

• Semesterly basis: twice per year (f=2)

• Continously basis: twelve times per year (f=12)

Education & Examination Guide

Education & Examination Guide

Loans and methods to pay them back

• All to be paid back in one single payment, at the end

Education & Examination Guide

All to be paid back in one single payment, at the end

Education & Examination Guide

L Int Int Int Int+Loan

Interests = Debt (L) · Interest Rate (r)

Education & Examination Guide

To pay periodical payments, each one of them with a constant

A=L/n Interests = Debt (L) · Interest Rate (r)

Education & Examination Guide

To pay constant periodical payments

Education & Examination Guide

To pay constant periodical payments

Education & Examination Guide

the timeline of that example would be:

Loans – Waiting period

Debt in point n=0 (Debt0): the Loan

Debt in point n: Debtn = Debt0·(1+r)n

Loans – Waiting period

excel: =pmt(0.06;8;56180) = 9047

Loans – Waiting period

So, the repayment table of that example would be:

Actually, what it happened during that waiting period was:

Education & Examination Guide

Loans – waiting period (unexpected waiting period somewhere in the

The timeline corresponding to this case would be:

Education & Examination Guide

The steps to solve this type of exercises are the following:

Let’s find the first payments

-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’

Education & Examination Guide

Loans – waiting period (unexpected waiting period somewhere in the

1 6.793,40 3.000,00 3.793,40 46.206,60

2 6.793,40 2.772,40 4.021,00 42.185,60

3 6.793,40 2.531,14 4.262,26 37.923,34

so, the debt in this point is 37,923.34€

-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’

What is your debt in that point?

-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’

Loans – waiting period (unexpected waiting period somewhere in the

Debt in point n=3 (Debt3): 37,923.34

Debt in point n: Debtn = Debt0·(1+r)n

-50000. 6793.40 6793.40 6793.40 0 0 P’ P’ P’ P’ P’

Loans – waiting period (unexpected waiting period somewhere in the

Debt5 = 42,610.66 excel: =pmt(0.06;5;42610.66) = 10,115.62

-50000. 6793.40 6793.40 6793.40 0 0. 10115.62 10115.62 10115.62 10115.62 10115.62