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
see your previous post of the same question
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To calculate the amount of interest, monthly payment, and installment price of the speed boat, we'll follow these steps:
Step 1: Calculate the down payment:
30% of RM60,000 = (0.30) * RM60,000 = RM18,000
Step 2: Calculate the loan amount:
Loan amount = Cash price - Down payment
Loan amount = RM60,000 - RM18,000 = RM42,000
Step 3: Calculate the interest rate per month:
Interest rate per month = (Annual interest rate) / (Number of months in a year)
Interest rate per month = (6%) / (12) = 0.005
Step 4: Calculate the constant ratio:
Constant ratio = (1 + Interest rate per month)^(Number of months)
Constant ratio = (1 + 0.005)^(5*12)
Constant ratio = 1.005^(60)
(i) Calculate the amount of interest using the constant ratio formula:
Interest amount = (Loan amount) * (Constant ratio - 1)
Interest amount = RM42,000 * (1.005^60 - 1)
(ii) Calculate the monthly payment:
Monthly payment = (Loan amount + Interest amount) / (Number of months)
Monthly payment = (RM42,000 + Interest amount) / (5*12)
(iii) Calculate the installment price of the speed boat:
Installment price = Down payment + (Monthly payment * Number of months)
By applying these steps, you can accurately compute the amount of interest, monthly payment, and installment price of the speed boat under the given installment plan with a reducing balance interest rate of 6%.