Question

Given the home financing of worth Rs. 8.25 million and expected profit of 12.5% by the bank, prepare the diminishing musharakah contract for a period of 15 years.

Answer 1

Yearly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$ 8,250,000
Rate of interest per period:
Annual rate of interest		12.5000000%
Frequency of payment	=	Once in 12 month period
Numer of payments in a year	=	12/12 =	1
Rate of interest per period	R	0.125 /1 =	12.50%
Total number of payments:
Frequency of payment	=	Once in 12 month period
Number of years of loan repayment	=	15.00
Total number of payments	N	15 × 1 =	15
Period payment using the formula	=	[ 8250000 × 0.125 × (1+0.125)^15] / [(1+0.125 ^15 -1]
Yearly payment	=	$ 1,243,800.95

 

DIMINISHING musharakh contract:

Period	Beginning liability	Uniform ANNUAL payment	Interest owed	Principal payment	Total owed at end of month
N	A	C	B= A* 0.125000	D=C-B	E=A-D
1	8,250,000.00	1,243,800.95	1,031,250.00	212,550.95	8,037,449.05
2	8,037,449.05	1,243,800.95	1,004,681.13	239,119.82	7,798,329.23
3	7,798,329.23	1,243,800.95	974,791.15	269,009.79	7,529,319.44
4	7,529,319.44	1,243,800.95	941,164.93	302,636.02	7,226,683.42
5	7,226,683.42	1,243,800.95	903,335.43	340,465.52	6,886,217.90
6	6,886,217.90	1,243,800.95	860,777.24	383,023.71	6,503,194.19
7	6,503,194.19	1,243,800.95	812,899.27	430,901.67	6,072,292.52
8	6,072,292.52	1,243,800.95	759,036.56	484,764.38	5,587,528.13
9	5,587,528.13	1,243,800.95	698,441.02	545,359.93	5,042,168.20
10	5,042,168.20	1,243,800.95	630,271.03	613,529.92	4,428,638.28
11	4,428,638.28	1,243,800.95	553,579.78	690,221.16	3,738,417.12
12	3,738,417.12	1,243,800.95	467,302.14	776,498.81	2,961,918.31
13	2,961,918.31	1,243,800.95	370,239.79	873,561.16	2,088,357.15
14	2,088,357.15	1,243,800.95	261,044.64	982,756.30	1,105,600.84
15	1,105,600.84	1,243,800.95	138,200.11	1,105,600.84	0.00