Ahmad bought a set of sofa and paid RM200 as a down payment. The balance was to be paid by monthly payments of RM150 for two years. The interest rate was charged 10% per annum based on the original balance.
Find
i) the amount of the loan,
ii) the cash price,
iii)the amount he has to pay immediately after the 20th payment, if he decides to settle all the outstanding debts. Use the Rule of 78.
PV of remaining debt
= 150( 1 - 1.0083333..^-24)/.008333
= 3250.63
if paid in cash it would have been
3250.63 + 200 = 3450.63
amount owing after 20 payments using today's method
= 3250.63(1.0083333^20 - 150(1.0083333^20 - 1)/.008333
= 3837.51 - 3249.81
= 587.71
don't know how to use the "rule of 78", the above is the actual method used today.
Thanks a lot Reiny !! :)
To find the answers to these questions, let's break down the information given step by step.
i) To find the amount of the loan:
Since Ahmad made a down payment, the loan amount is the cash price minus the down payment.
Loan amount = Cash price - Down payment
Loan amount = ? - RM200
Unfortunately, the cash price was not provided in the given information. To find the cash price, we need some additional information or clarification.
ii) To find the cash price:
As stated earlier, the cash price was not provided, so we can't calculate it with the given information. We would need either the cash price or some additional information, such as the interest rate charged for the loan.
iii) To find the amount he has to pay immediately after the 20th payment:
To calculate this amount, we need to understand the Rule of 78s. The Rule of 78 is a formula used to determine the proportion of prepaid interest included in each installment payment in a loan period. It is often used for early settlement calculations.
Unfortunately, the Rule of 78s is not applicable or commonly used in all countries or situations. Without knowing the specific application of the Rule of 78s in this scenario, we cannot accurately calculate the amount Ahmad has to pay after the 20th payment.
To get the complete answers, we would need more information, such as the cash price, the interest rate charged, and further details about the Rule of 78 application for early settlement.