Question

1) Angeline bought an RM8,000 hi-fi set through an instalment plan. She has to pay RM4,000 down payment and 10 monthly payments of RM450 each. By using the Constant Ratio formula, find:

a) The total interest charged.

b) The instalment price.

c) The simple interest rate charged.

d) The approximate effective rate.

2) A loan of RM5,000 for 20 months at 10% per annum simple interest rate was settled by making 20 monthly payments. Find the outstanding principal just after the eighth payment by using the Rule of 78.

Answer 1

the cost for which angeline bought hi-fi set =8000 rm

the amount is paid as down payment =4000 rm

therefore,the original balance due = cost price - down payment

=8000-4000

=4000 rm

a)monthly payments=10

amount paid as installment=450rm

therefore,total amount paid through installments= months * amount per month

=10*450

=4500rm

total interest charged=amount paid- balance

=4500-4000

=500 rm

b)thereforeinstallement price=down payment + amount paid through installements

=4000+4500

=8500 rm

c)simple interest rate charged =

amount paid through installements=

amount=4500 rm;   p=balance;t=per year=1/12;r=rate to be found;

4500=4000+(4000*10*r)/(100*12)

=>4500-4000=(4000*10*r)/(100*12)

=>500=(40000*r)/1200

=>4000*r=1200*500

=>r=600000/4000

=>r=15%

d)effective rate=

=>r=14.5%

e)rule of 78 we have,