The cash price of a speed boat is RM60,000. Under an installment plan, a buyer may pay a 30% down payment followed by monthly payments for 5 years. If the interest is 6% on the reducing balance, calculate
(i) the amount of interest using the constant ratio formula,
(ii) the monthly payment,
(iii) the installment price of the speed boat
To solve this problem, we need to follow these steps:
Step 1: Calculate the down payment.
The down payment is 30% of the cash price.
Down payment = 30/100 * RM60,000 = RM18,000
Step 2: Calculate the loan amount.
The loan amount is the remaining balance after the down payment.
Loan amount = Cash price - Down payment = RM60,000 - RM18,000 = RM42,000
Step 3: Calculate the monthly interest rate.
The annual interest rate is 6%, and we need to calculate the monthly rate.
Monthly interest rate = Annual interest rate / 12
Monthly interest rate = 6/100 / 12 = 0.005
Step 4: Calculate the number of payments.
Since the installments are for 5 years, and there are 12 months in a year, the total number of payments is 5 * 12 = 60.
(i) Calculate the amount of interest using the constant ratio formula:
The constant ratio formula for calculating interest is:
Interest = Principal * Rate * Time
In this case, Principal = Loan amount, Rate = Monthly interest rate, and Time = Number of payments.
Interest = RM42,000 * 0.005 * 60 = RM12,600
(ii) Calculate the monthly payment:
To calculate the monthly payment, we need to add the interest to the loan amount and divide it by the number of payments.
Monthly payment = (Loan amount + Interest) / Number of payments
Monthly payment = (RM42,000 + RM12,600) / 60 = RM900
(iii) Calculate the installment price of the speed boat:
The installment price is the loan amount plus the total interest.
Installment price = Loan amount + Interest
Installment price = RM42,000 + RM12,600 = RM54,600
Therefore, the answers are:
(i) The amount of interest using the constant ratio formula is RM12,600.
(ii) The monthly payment is RM900.
(iii) The installment price of the speed boat is RM54,600.
I am not familiar with some of the terms in your question, but ...
amount to be financed = 60000(.7) = 42000
let the payment be p
i = .06/12 = .005
n = 5(12) = 60
42000 = p (1 - 1.005)^-60)/.005
p = 811.98
The monthly payment is 811.98
See what you can do with that.