May 1991

Case 1:  Endowment Mortgage

£35,000 Borrowed over 20 Years @ 11.85% p.a.

Analysis Table 2

A

B

C

D

E

F

G

H

I

J

K

L

Year

Gross Cash Flow Out

Interest Paid

Principal Repaid

Interest
Applicable
for Tax
Relief

Tax Relief
on Interest

Tax
Relief on
Premium

Net Cash
Flow Out

@ x% Internal Rate of Return

Tax Relief at 29% p.a.

@ 12%

@13%

@13.2%

13.18%

pv

pv

pv

pv

1

4789.73

4147.50

494.27

3200.00

928.00

5.36

3856.37

3443.19

3412.72

3406.69

3407.29

FV = P(1 + i )n

= £35,000 (1.1185)20

i.e. FV = £328,691.00

2

4789.73

4088.93

552.84

3200.00

928.00

5.36

3856.37

3074.27

3020.10

3009.44

3010.50

3

4789.73

4023.42

618.35

3200.00

928.00

5.36

3856.37

2744.89

2672.66

2658.52

2659.93

4

4789.73

3950.14

691.63

3160.11

916.43

5.36

3867.94

2458.15

2372.28

2355.56

2357.22

5

4789.73

3868.18

773.59

3094.54

897.42

5.36

3886.95

2205.56

2109.68

2091.11

2092.96

6

4789.73

3776.51

865.26

3021.21

876.15

5.36

3908.22

1980.03

1877.19

1857.38

1859.35

7

4789.73

3673.98

967.79

2939.18

852.36

5.36

3932.01

1778.64

1671.34

1650.78

1652.82

8

4789.73

3559.30

1082.47

2847.44

825.76

5.36

3958.61

1598.82

1489.07

1468.15

1470.23

9

4789.73

3431.03

1210.74

2744.82

796.00

5.36

3988.37

1438.25

1327.67

1306.71

1308.78

10

4789.73

3287.55

1354.22

2630.04

762.71

5.36

4021.66

1294.87

1184.73

1163.97

1166.03

11

4789.73

3127.08

1514.69

2501.66

725.48

5.36

4058.89

1166.83

1058.14

1037.76

1039.78

12

4789.73

2947.59

1694.18

2358.07

683.84

5.36

4100.53

1052.50

946.02

926.15

928.12

13

4789.73

2746.83

1894.94

2197.46

637.26

5.36

4147.11

950.41

846.69

827.45

829.35

14

4789.73

2522.28

2119.49

2017.82

585.17

5.36

4199.20

859.24

758.70

740.14

741.98

15

4789.73

2271.12

2370.65

1816.90

526.90

5.36

4257.47

777.82

680.73

662.91

664.67

16

4789.73

1990.19

2651.58

1592.15

461.72

5.36

4322.65

705.12

611.64

594.58

596.26

17

4789.73

1675.98

2965.79

1340.78

388.83

5.36

4395.54

640.19

550.40

534.10

535.71

18

4789.73

1324.54

3317.23

1059.63

307.29

5.36

4477.08

582.20

496.12

480.57

482.10

19

4789.73

931.44

3710.33

745.15

216.09

5.36

4568.28

530.41

447.98

433.18

434.64

20

4789.73

491.77

4150.00

393.42

114.09

5.36

4670.28

484.15

405.30

391.21

392.6

(Column F) Total

13,357.50

PV = Σpv

29,765.54

27,939.16

27,596.36

27,630.32

Arithmetic Average (per month)

£55.66

yields FV

287,127.12

321,945.39

329,443.04

328,684.87

OK