CH 3 SAVINGS & INVESTMENTS,

CREDIT AND DEBT

K1 – K16

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 CONTENT

CHAPTER 3

SAVINGS
AND
INVESTMENTS

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K1: TO COMPARE & CONTRAST 3 TYPES OF SAVINGS AND THEIR RETURNS

ASPECT SAVING ACCOUNT FIXED DEPOSIT ACCOUNT CURRENT ACCOUNT
People who has certain amount of
Account holders Most People Businessman
cash that they don’t need or use
None (Instead the account holder
Return = Interest Low High
has to pay for service charge)

Withdrawal of Anytime (ATM,debit card or online After the maturity date Anytime(Banking through Internet or
money banking) (3 mnth, 6 mnth, 9 mnth or 1 year) Telephone)

Through a referee who is a current

Proof / Method of
Account book Certificate of Saving account holder at the same branch
Account Opening
of bank
Cheque None None Yes
Yes. Withdrawing money beyond
Overdraft None None the balance of the account but
interest will be charged

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K2: TO CHOOSE CORRECT FORMULA EITHER SIMPLE INTEREST OR COMPOUND INTEREST

TO CALCULATE THE RETURN OF SAVING
if you see the word compound in the question than use compound interest if not use simple interest formula

SIMPLE INTEREST COMPOUND INTEREST = MV - Principal

t=time in year
I = Interest MV = Mature Value ( Total Savings)
P=Principal (Initial savings) P=Principal (Initial savings)
r=Interest Rate ( given in % must be converted to r=Interest Rate ( given in % must be converted to r/100)
r/100) n= number of period interest is compounded per year
t=time in year t=tempoh dalam tahun

Menukar unit masa lain kepada tahun Number of period interest is compounded per year
t = time in year every 6 mnth => 12 ÷ 6 = 2 kali setahun
6 months = 6/12 once every 3 mnth => 12 ÷ 3 = 4 kali setahun
4 months = 4/12 once every 4 mnth => 12 ÷ 4 = 3 kali setahun
1 week = 1/ 52 = 7/365 once a mnth => 12 ÷ 1 = 12 kali setahun
3 days = 3/365 quarterly => 12 ÷ 3 = 4 kali setahun
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K3: THE DIFFERENCE BETWEEN SIMPLE INTEREST AND COMPOUND INTEREST

Encik Charles deposited RM6 000 in a fixed deposit account at Bank Berjaya for 2 years at a rate of
interest of 6% per annum. Calculate the interest received by Encik Charles if he is given compound interest
(compounded every 4 months) in comparison to simple interest.

1. COMPOUND INTEREST WILL YIELD HIGHER INTEREST OF RM756.97 IN COMPARISON TO

SIMPLE INTEREST OF RM720

2. SIMPLE INTEREST FORMULA WILL GIVE THE VALUE OF INTEREST RECEIVED WHEREAS
COMPOUNDED INTEREST FORMULA WILL GIVE THE VALUE OF TOTAL SAVINGS
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K4: SUBSTITUTING VARIABLE IN FORMULA WITH RELEVANT INFO FROM QUESTION

SIMPLE INTEREST COMPOUND INTEREST = MV - Principal
P At the beginning of a year, Mrs Liew saves RM15 000
Encik Badrul saved RM5 000 in bank with interest
in her saving account with the rate of 3% per annum
r
rate of 3% per annum for a period of 2 years. and compounded every 6 months. What is Mrs Liew
Calculate the interest that Encik Badrul will
total savings at the end of the third year and calculate
t
receive and the total savings for the period of 2 the amount of interest she received.
years.

Interest = I = P r t = 5000 x 3% x 2 = RM300

TOTAL = = RM16 892.44
SAVINGS
Kalkulator

5000 x 3 a b/c 100 x 2= 15000 ( 1 + 0.003 a b/c 2 ) ^ 2(3)

Total Savings Interest Received

= RM5000 + RM300 = RM5300 = RM16 892.44 - RM15 000 = RM1 892.44
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K5: SOLVING PROBLEMS INVOLVING SIMPLE INTEREST AND COMPOUND INTEREST

Question 1 Question 2

Encik Shah wants to save RM10 000 in fixed Puan Emily saves RM10 000 in a bank. At the end of the eigth
deposit account for 9 months. Below are the year, her total saving is RM19 992.71.If the bank pays an annual
interest rates offered by a bank to Encik Shah interest of x% and compounded every 6 months. Find x.
1 months 3.0%
3 months 3.5%
6 months 3.75%
9 months 4.00% ÷10 000 ÷10 000
12 months 4.25%
Calculate the amount of interest Encik Shah will
receive if he is saving for 9 months term
Interest = Prt
= RM10 000 x 0.04 x 9/12 -1 -1
= RM300
2x x2

x = 0.08848
x in % 0.08848 x 100 = 8.8%
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K6: TO COMPARE & CONTRAST 3 TYPES OF INVESTMENT AND THEIR RETURNS

ASPECT COMPANY SHARE UNIT TRUST REAL ESTATE PROPERTY
Defination ● to raise capital for the company ● Unit trusts pool the resources of ● Real estate is immovable property
● the buyer of share becomes investors into one large fund, i.e land and buildings (land, house,
among of the company’s owner which is then divided into share shop lot, office lot)
Manage ● investors themselves ● professional fund managers ● investors themselves
by monitor by Securities
Commission & Bank Negara
Malaysia
Return 1) Dividend - profits of company divided at the end of financial year to 1) Rent - received when the property is
shareholders based on the quantity shares owned by shareholders. rented
2) Bonus Share - shares given for free to the existing shareholders 2) Capital Gain - when property is sold &
3) Capital Gain - when shares are sold & the selling price is higher the selling price is higher than the
than the buying price buying price
Formula Dividend = Dividend Percentage x Shares Buying Value a) Rent
Bonus Share = Price per unit share x number of shares b) Capital Gain = Selling Price -
Keuntungan Modal = (Selling price per unit Share - Buying price per unit Payments (Deposit + total of bank
loans + total cost incurred during the
Shares) x Number of Shares
property’s purchase)

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K7: CALCULATE THE RETURN ON SHARES AND UNIT TRUST

RETURNS GIVEN LUMP SUM VALUE GIVEN PRICE PER UNIT

Ahmad bought 3000 unit of shares and Puan Siti invested in a company 3 000 unit of shares
received a dividend of RM600 after a worth RM2.00 per unit. After a year the company
DIVIDEND year. declared a dividend of 5%.

Dividen = RM600 Dividen = 5/100 x RM2 x 3 000 = RM300

In the consequent year the company In the consequent year the company issues a bonus at
BONUS declared bonus share to the shareholder, one share per 2 unit shares held. Puan Siti will receive
SHARE Ahmad received bonus worth of RM1500 Number of Bonus Share = 3000/2 = 1500
Bonus Share = RM1500 Syer Bonus = RM2 x 1500 = RM3000

After a year, Puan Siti sold all her shares for RM2.20
Later, Ahmad sold all of his share and per unit. How much is Puan Siti’s capital gain?
CAPITAL received a capital gain of RM 900
GAIN Capital Gain = (RM2.20 - RM2.00) x 4500
Capital Gain = RM 900
= RM900
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K8: APPLICATION OF RETURN ON INVESTMENT FORMULA

Portfolio Total Return Return On Investment

Saving Account & Fixed Total of Interest Received (simple

Deposit Account interest and/or compound interest)
Total of Dividen, Bonus Share and
Shares and Unit Trust
Capital Gain received

Real Estate Property Total of Rents and Capital Gain

Combination Of Savings Total of all the above

and Investments

Return On Investments (ROI)

1. To calculate the profit or loss of investments.
2. To find the highest return among investments.

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K9: MENGAPLIKASI NILAI PULANGAN PELABURAN (ROI)

Nilai Pulangan Pelaburan (ROI) Hartanah Nilai Pulangan Pelaburan (ROI)
Encik Hussein bought a house on 1 January 2015 in Cheras at Mr Navin deposited RM200 000 into a savings account with an
RM300 000 and cleared 10% down payment of RM30 000. Encik interest rate of 1% per annum. The balance RM200 000 is
Hussein sold the house at a price of RM600 000 after having owned kept in a fixed deposit account at 4% interest rate per annum.
the house for 20 years.The loan amount amortised to the bank was
RM475 000. During that period, he managed to earn a rent of RM60 Total Return
000. Other expenses incurred are as follows: = Savings Interest + Fixed Deposit Interest
= (RM200 000 x 1/100 x 1) + (RM200 00 x 4/100 x 1)
Stamp Duty during sale & purchase RM4 000 = RM2 000 + RM8 000 = RM10 000
Agent’s commission RM2 000
Legal Cost during sale & purchase RM4 000 ROI = RM10 000 x 100% = 2.5%
Solution: RM400 000
Return on investment
= Rent + Capital gain Use of ROI
= RM60 000 + (RM600 000 - RM30 000 - RM475 000 - RM4000 1. Both investments are wise investments/profitable
- RM2 000 - RM4 000) 2. Which investment gives a higher return?
= RM145 000 Encik Hussein investments gives a higher return in
ROI = RM145 000 x 100% = 48.33% comparison to Mr. Navin at 48.33%
RM300 000
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT
K10: BUYING SHARES USING COST AVERAGING STRATEGY
BUYING SHARES AT LUMP SUM VS USING COST AVERAGING STRATEGY Advantages of Cost Averaging Strategy
Miss Lee buys shares of Syarikat Pelita in lump sum at the cost of RM20 000 which 1. Able to take advantages of the unit
RM2.00 per unit. Mrs Esther Wong on the other hand also has RM20 000 and wants to price changes
buy the shares in common installments within fews months. ● when the price is lower more shares
Ms Lee shares buying can be bought.
Number of Shares = RM20 000 ÷ RM2 = 10 000 unit shares ● Average cost per unit shares is
Kos purata seunit saham = RM2 reduce in long terms
Mrs Esther Wong shares buying
2. Not influenced by emotions
● Investing periodically & consistently
without being influenced by emotion
due to the volatile price of shares

3. Lower the risk of Loss

● The investor can buy the shares by
looking at current situation thus
reducing the risk of loss

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT
K11: FACTORS 1) Return on REP Investments 2) Before Investing
3 factors that affect the return on 3 factors that should be considered by an investors before
investments for Real Estate Property investing are as follows:
● Risk Level - the possibility of losing/incurring loss in the
1. Location • REP located in urban investment
area has higher price in comparison to ● Return Level - high level of return is considered ideal
those located in rural areas ● Liquidity Level - how fast can an investment be turn to cash

2. Economic Situation • In a country

with good economic situation more REP
will be in demand thus price of REP will
increase

3. Political Situation • A stable political

situation will increase the demand for
REP as a result the price will also
increase

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K12: COMPARISON OF CREDIT AND DEBT AND THEIR MANAGEMENT

CREDIT DEBT WISE MANAGEMENT OF DEBT

● Bank Offers Credit Facility to ● an amount that has been ● Credit card users need to settle the
customers in the form of borrowed but has not been debt payment within the period
Credit Card settled stipulated by the bank to enjoy
● The base is if a customer use ● If a transaction is made using interest free period
the credit card in a a credit card,
transaction, ● the credit has been converted ● Pay the outstanding balance listed
● the bank will pay to the seller to debt on the credit card statement
● the customer will pay to bank ● The minimum amount paid by the
at a later period credit card holder provides
opportunity for the bank to charge
interest on the balance and may also
incur late payment charges
● Pay within the cash discount period
for payment of debts.

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K13: TO STATE THE ADVANTAGES & DISADVANTAGES OF CREDIT CARD

ADVANTAGES DISADVANTAGES
● Credit cardholders can enjoy a reward ● Incur charges such as
system in the form of cash rebate or point ●annual fees
redemption ●financial charge (interest)
●cash advance interest charges
● Does not require us to carry a lot of cash ●late payment charges

● Easy and efficient payment method ● Overspending

● Convenience of buying goods and services ● Some stores do not accept credit payment.
online.

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K14: THE EFFECTS OF MINIMUM PAYMENT AND LATE PAYMENT OF CREDIT CARD
Card Credit user will receive a monthly
statement
Situation1 Situation 2 Situation 3

Pay everything Make a minimum payment No payment is made

within the interest of 5% of total balance of
free periodi i.e 20 credit card statement
days from the date or minimum RM50 A finance charge will be imposed on
of the statement whichever is higher the unpaid balance based on daily
Local rate. The charges are 15% to 18%
Transaction yearly.
No charges A finance charge will be
imposed on the unpaid Late payment charges minimum of
balance based on daily rate. RM10 atau 1% on unpaid balance
The charges are 15% to will be imposed on next month
18% yearly. statement
Overseas
Transaction Extra charges of Extra charges of Extra charges of
1% 1% 1%
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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K15: SOLVING PROBLEM INVOLVING THE USAGE OF CREDIT CARD.

Daniel received his credit card statement for January 2019 from Bank Sentosa. The statement shows that Daniel has
a current amount (outstanding balance) of RM5 200. It is assumed that Daniel did not use his credit card in February.
(a) What is the minimum payment to be paid?
(b) If he only makes a minimum payment for January and the statement date is 15 days from the expiry date of the
interest free period, what is the balance shown in his February statement?
(c) If he missed his payment for January, what is the balance shown in his February statement?

a) Minimum Payment = 5/100 x 5200 = RM260 (c) Outstanding balance = RM5 200
Period subject to financial charges
b) Outstanding balance = RM5 200 - RM260 = 15 days = (15 ÷ 365) year
= RM4 940
Period subject to financial charges Interest charged
= 15 days = (15 ÷ 365) year = RM5 200 x [(18 ÷ 100) x (15 ÷ 365)] = RM38.47
Interest charged = RM4 940 x [(18 100) x (15 ÷ 365)]
= RM36.54 Late payment charges
Current amount (Outstanding balance) in February = ( ) 100 x (RM5 200 + RM38.47) = RM52.38
= RM4 940 + RM36.54 = RM4 976.54
Current amount in February
= RM5 200 + RM38.47 + RM52.38 = RM5 290.85

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 3. SAVINGS & INVESTMENTS, CREDIT & DEBT

K16: CALCULATING 2 TYPES OF LOAN REPAYMENT

FLAT INTEREST INTEREST ON BALANCE

Encik Azlan obtained a personal loan of RM Encik Harith obtained a personal loan of RM10 000 from Bank Mulia with
10 000 from Bank Mulia with an interest rate an interest rate of 6% on the balance. The repayment period is 7 years
while the monthly instalment is RM150. Calculate the total amount of
of 4% per annum. The repayment period is 7
interest payable by Encik Harith for the first three months.
years. What is the monthly instalment to be
paid by Encik Azlan? First month interest = RM10 000 x 6/100 x 1/12 = RM50.00
Loan at the end of first month = RM10000 + RM50 = RM10 050
Balance after first instalment = RM 10 050 - RM 150 = RM9 900
Total Repayment
A = P + Prt = Principal + Interest Second month Balance of the loan = RM9 900
P = RM10 000 r = 4% t = 7 years Second month interest = RM9 900 x 6/100 x 1/ 12 = RM49.50
Thus, total repayment Loan at the end of second month = RM9 900 + RM49.50
A = RM10 000 + (RM10 000 x 4/100 x 7) Balance after second instalment
= RM9 949.50 — RM150 = RM9 799.50
= RM10 000 + RM2 800
= RM12 800 Third month Balance of the loan = RM9 799.50
Third month interest = RM9 799.50 x 6/100x 1/12 = RM49.00
Monthly instalment Loan at the end of third month = RM9 799.50 + RM49.00 = RM9 848.50
Balance after third instalment = RM9 848.50 — RM150 = RM9 698.50
= RM12 800
84 months Total interest for the first three months is RM50.00 + RM49.50 + RM49.00
= RM152.38 = RM148.50
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