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In: Accounting

Abdullah bought a car with a value of 10800 dinars through murabaha, provided that he pays...

Abdullah bought a car with a value of 10800 dinars through murabaha, provided that he pays the price of the car and the profits in 60 monthly installments, each of which is worth 225 dinars. Find the simple annual interest rate؟

a. 0.05

b.0.0625

please make sure to choose the correct answer 100%

Solutions

Expert Solution

Calculation of Simple Annual Interest Rate

Value of Car = 10,800 Dinars

No. of Installments = 60 (5 Years)

Amt. of each Installments = 225 Dinars

Total Amount to be paid as per payment schedule = No. of Installments * Amt. of each Installment = 60 Installments * 225 Dinars = 13500 Dinars

Amt. of Interest = Total Amt. to be paid as per payment schedule - Value of Car = 13,500 Dinars - 10,800 Dinars = 2,700 Dinars

Rate of Interest = (Amt. of Interest / Value of Car) * 100 / 5 Years = (2,700 Dinars / 10,800 Dinars) * 100% / 5 Years

= 5% Per Annum i.e. Option a. 0.05

  

ekkarill92 answered 2 years ago
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