ADVANCED MATHEMATICS

(DEFINITE INTEGRAL AND FINANCIAL MATHEMATICS)

HSC ASSESSMENT TASK 3

MR. MANKOO

KELLYVILLE HIGH SCHOOL

ARAV ZAD
Part A (ALL SCREENSHOTS ARE TAKEN ON DESMOS)
Question 1
Question 2
 PART B

Question 1

a) ‎

CLIENT CLIENT INFORMATION WEBSITE OF EXPLANATION

CATEGORY AUTHENTICITY

Client Info: Alex Jonson, 18, HSC Graduate

Immediate Plan Pursuing 3 year Computer Science https://au.hudson.c

University Degree and also working as a om/employers/recr
Junior Web-Developer Part Time. uitment/technology-
it/web-developer-jo
b-description/

Start Date January 1st, 2025, following the

completion of Year 12

Weekly Hours 15 hours (Assuming 37.5 hours per week

full time). Assuming working 2 days a
week.

Current Savings in $2828 after Year 12 https://www.westpa Client’s situation is a “typical

Bank Account at 18 c.com.au/personal- representation of a Year 12
banking/solutions/b student”.
udgeting-and-savin
gs/savings/savings-
by-age/

High Interest On average, the rate is between 4-5% https://moneysmart A high-yield savings
Savings Account currently. Assume 4.5% p.a. conservative .gov.au/banking/sa account can be an ideal
estimate (safe) to account for variability in vings-accounts place to keep money you
interest rates. are not using in the short
term but that you want fairly
easy access to.

Award Type Professional Employees Award https://library.fairwo The “relevant employment

[MA000065] - Therefore, employers pay rk.gov.au/award/?kr award agreement” so that
more than minimum wage. n=ma000065 the employer pays more for
quality of work input.

Nature of Loan Mortgage, Home Loan https://www.money. One of the most common
com.au/personal-lo types of first loans,
 ans/personal-loan- Mortgage for property in
statistics young adults.

Parents Help Client’s parents offer to help out on one

time expenses such as HECS Fees and
Stamp Duty.

b)

Timeline:

Date Savings Description

1/01/2025 $2,800 Client begins tertiary studies.

Part-time job as a developer
(annual salary of $30,947,
pro-rata to 2 days a week).
Client lives with parents.

1/01/2028 $33,134 Client completes tertiary

studies, begins work as a full
time web developer (annual
salary of $58,442). Client
continues to stay with
parents.

1/01/2030 $55,756 Client looking to purchase a

house valued at $750,000.
This will be financed with part
savings, part loan.

2060 Client fully pays off mortgage

c)

After my client starts earning a steady income, he now wishes to invest into a property 5 years
after graduating. Hence, the nature of the loan my client will be taking is a Home Loan. The
property value will be $750,000
(https://www.abc.net.au/news/2024-05-01/house-prices-breakdown-by-state-territory-
apital-city-region/103784240) amd the loan term will be 25 years, 300 months. It is assumed
that the interest rate is 6% p.a locked in contract for the whole term.
(https://www.savings.com.au/savings-accounts/savings-accounts-5-percent#Compare-5-Savin
s-Accounts). The deposit amount will be $100,000 and the loan he will be asking for will be
$650,000. He wishes to repay $4,188 per month. According to the Loan to Value ratio, where: ​
𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 𝐴𝑚𝑜𝑢𝑛𝑡 650,000
𝐿𝑇𝑉 𝑅𝑎𝑡𝑖𝑜 = 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝑉𝑎𝑙𝑢𝑒 , in this case, 750,000 = 86. 67%

As the ratio is <93%, 86.67% (The national bank placeholder), it is hence an eligible home loan.

The stamp duty, calculated on:

https://www.macquarie.com.au/home-loans/home-loan-calculators/stamp-duty-calculator.html

Assumptions include the following Screenshot in part d).

This is an appreciating asset, seeing a growth rate of 6%

d)
Question 2

a)

Total of the Investment: $128,854. Total Interest Accrued: $10,666

The graph of "Savings Over Time & Interest Accrued Over Time" shows the savings balance
and interest accrued over 60 months (5 years). The blue line, representing the savings balance,
increases steadily at first and then more rapidly, as my client’s pay increases post tertiary
studies. His savings reach $128,854 due to regular savings contributions and the effect of
compound interest in the High Interest Savings Account compounding monthly at 4.5%.

The red line, showing the interest accrued, grows more gradually, illustrating the impact of
compounding interest, culminating in a total interest of $10,666. This graph highlights the
significant growth of savings through consistent contributions and the benefits of compound
interest over time exponentially.

End of Column:
b) Below is a calculation of understanding the application of geometric series for when my
client works as a junior web developer in tertiary studies.
 Here is proof that after a time period of 36 months, the
Closing Balance is equivalent to $4208, close to the
calculation I made with a percentage error calculated to
be: 0.02944%, pretty much negligible.

Seen in the Spreadsheet, in green is $4208.

Question 3

a) Below is a graph representing the Amount Owing (Loan) over Time with additional
information of Total Repayments, Total Principal Payments and Total Interest Accrued
Over Time.

Total Cost of Loan = $650,000 + $606308 = $1,256,388

Total Interest Payable = $606,308

The graph of "Loan Profile" illustrates the financial dynamics of a loan over a 25-year period
(300 months). Initially, the value of the loan (in blue) starts at $650,000 and decreases steadily
as repayments are made. The total principal payments (in orange) gradually increase over time,
reflecting the growing portion of the loan payments that go toward repaying the principal. The
total interest accrued (in green) rises consistently, highlighting the cumulative interest paid over
the loan term. The total repayments (in dark blue) line climbs steadily, indicating the overall
amount repaid by the borrower. By the end of the 300 months, the total cost of the loan amounts
to $1,256,388, with $606,308 paid in interest. This graph underscores the significant impact of
interest on long-term loans and the gradual reduction of the principal balance through consistent
repayments.

CUMULATIVE INTEREST PAID BY ITSELF

However, total Interest payable is the amount an individual or company owes a lender at a
particular time but hasn't paid yet. This helps me to keep track of my client’s liabilities on their
balance sheet and create their financial statements. The graph therefore represents the total
interest accrued over time being an additional variable on top of the loan value over time and
hence looks like this:

INTEREST OWABLE PLUS PRINCIPLE VALUE

 b)

To Calculate monthly repayments:

Continued (Table is too long)

This confirms that at a monthly repayment of $4188 be able to pay off an initial loan
amount of $650000 with an interest rate of 6% monthly (0.005) in 300 Months.
Question 4

As time goes on, the investment model that has been made for my client will be subject to
change as in the world of finance, nothing remains constant. In particular, the common changes
of fluctuations in interest rates. To do so, a sensitivity analysis will be conducted, where the
interest rate is not fixed in the future. By testing such assumptions under different scenarios, I
can paint a better picture for my client who wishes to alter the repayment value in response to
the interest rate.

By crafting this table, my client can see as the interest rate goes up as well as how his current
loan repayment would affect the period of how many months it would take to repay the loan.
This was done in assistance with the moneysmart.gov.au Mortgage Calculator. Taking an
example, if interest rates decrease from 6% (In current Model) to 5%, with the same current
$4188 monthly repayment plan, my client will be pleased to know that at that moment in time he
will be paying off the loan in 252 months, 48 months prior to the previous time period, 4 years! A
graph can be modelled to represent this. By
changing the assumption from 6% to 5%,
The Light Blue Line, Value of the Loan over Time, states the Loan value to be $0, is very, very
close, if not, exactly around 252 months.

However, on the graph, my client can see “-” on certain cells. These represent how the
Repayment won't cover interest and the fees Repayment won't cover interest and fees. The "-"
symbols in the table "Loan Repayment vs. Interest Rate on Loan (sensitivity analysis)" indicate
scenarios where the specified monthly repayment amounts would be insufficient to cover the
interest and fees associated with the corresponding interest rates. In other words, at these
combinations of loan repayment amounts and interest rates, the payments would not even
cover the interest accruing each month, let alone reduce the principal balance. This would result
in the loan balance increasing over time rather than decreasing, which is an unsustainable and
undesirable financial situation for my client.

For example, according to the table, if the interest rate rises to 7% and due to other factors such
as job loss or personal reasons, he needs to reduce the repayment amount in a month to say,
$3688, according to the table there is a dash. Now, if remodelling the situation in the Excel
Spreadsheet, we get:

As the Principal starts going downwards in the negatives, it is hence a provision that limits the
amount of unpaid interest charges that can be added to the loan's principal balance. Therefore
being a valid table, and as life gets complicated - where the interest rate fluctuates and Loan
Repayments change in value - I can show my client a pictured detailed model of his future
financial situation.