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Question: Today is 1 July 2021. You are looking to purchase an investment property today (after months of research and negotiations). You have spoken to Peter, the loan specialist at Harrison Bank, to negotiate the terms of your mortgage. You and Peter have agreed to the following terms: You will borrow $410,000 today in order to purchase your chosen property. This mortgage will be repaid by level monthly repayments. Your first repayment to the bank will occur exactly 1 month from today, on 1 August 2021, and the final repayment will occur exactly 26 years from today, on 1 July 2047. Peter has arranged for an interest rate of 6.5% p.a. effective to be locked in for the life of this loan.

In preparation of your tax return, you need to calculate the interest charged on your loan so that you can claim it as a tax deduction. Specifically, you are interested in the financial year ending 30 June 2022.

For the purposes of this question, pretend that the repayment on 1 July 2022 is occurring on 30 June 2022 so that there are 12 repayments made in this financial year.

Further, the subscripts used for loan outstanding are measured in months, e.g. 240 is the loan outstanding after 240 months/20 years.

need to answer: 1. What does the difference 012 represent? And Determine the value of 12?

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