An estate agent uses a spreadsheet to calculate monthly mortgage payments for clients. (a) Identify two variables that would need to be entered into the spr...
Question 1 Report
An estate agent uses a spreadsheet to calculate monthly mortgage payments for clients.
(a) Identify two variables that would need to be entered into the spreadsheet model. [2]
(b) Explain what is meant by a 'what-if' analysis in a spreadsheet. [2]
(c) Describe two advantages of using a spreadsheet model for mortgage calculations rather than calculating by hand. [2]
Answer Details
(a) Two variables that would need to be entered into the mortgage spreadsheet model:
- The total amount of the mortgage loan (the principal). [1]
- The annual interest rate applied to the loan. [1]
Other possible variables include the loan term (number of years) and any deposit amount, but the loan amount and interest rate are the most fundamental inputs.
(b) "What-if" analysis is when the user changes one or more input variables in a spreadsheet model [1] to observe how the results are affected. For example, the estate agent could change the interest rate from 5% to 6% to see how the monthly payment increases, helping the client understand the financial impact of rate changes before committing to a mortgage. [1]
(c) Two advantages of using a spreadsheet model for mortgage calculations:
- The spreadsheet automatically recalculates all results instantly whenever a variable is changed, giving immediate answers that allow the agent and client to explore different scenarios in real time. [1]
- The spreadsheet is far less likely to make calculation errors compared to manual arithmetic, which is especially important for complex financial formulas involving compound interest over many years. [1]
Download The App On Google Playstore
Everything you need to excel in your exams
