# Annuity

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.

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1. 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.

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posted by Reiny
2. Thanks a lot Reiny !! :)

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posted by Fara

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