Study Case Chapter 7: Annuity

Case: Ameera borrowed RM10,000 from A Bank for 5 years at the interest 1.5% compunded
monthly.
a) Find the monthly repayment.
b) Calculate the total interest paid for the loan.
c) Determine the 3rd repayment amount to settle all arears if he had not paid the first two
repayment.
d) Immediately after 40th repayment. Ameera decided to settle the loan. Calculate the
amount of settlement.

Story line.

Ameera have a problem, go to bank, and meet the bank officer (Syikin) to solve problem
above.

Dialogue

Ameera: Good morning! I'm Ameera, and I have a problem regarding my loan. Can I speak
with a bank officer?

Syikin: Good morning, Ameera. I'm Syikin, the bank officer. How can I assist you with your
loan?

Ameera: Thank you, Syikin. I borrowed RM10,000 from A Bank for 5 years at an interest rate
of 1.5% compounded monthly. I need help with a few calculations.

Syikin: I'm here to help. Let's go through each question step by step. What's your first
question?

Ameera: Firstly, I would like to know the monthly repayment amount.

Syikin: Sure. The monthly repayment can be calculated using the formula. Let's see. The
principal amount is RM10,000, the monthly interest rate is 1.5% divided by 100 and divided
by 12, and the number of payments is 5 years multiplied by 12 months per year.

Ameera: So, what's the monthly repayment?

Syikin: The monthly repayment comes out to be approximately RM173.10.

Ameera: Alright, thank you. Now, I'm curious about the total interest I will have to pay for
the loan. Can you help me calculate that?

Syikin: Certainly. To find the total interest paid, we can subtract the principal amount from
the total amount repaid over the loan term. The total amount repaid can be calculated by
multiplying the monthly repayment by the number of payments.
Ameera: And what's the total interest paid?

Syikin: The total interest paid for the loan is approximately RM3,385.97.

Ameera: I see. Now, I have another question. What would be the amount of the 3rd
repayment if I hadn't made the first two repayments yet?

Syikin: To determine the 3rd repayment amount, we need to calculate the remaining loan
balance after two repayments and divide it by the remaining number of payments. Let me
calculate that for you.

(After calculating)

Syikin: The 3rd repayment amount to settle all arrears, considering you haven't made the
first two repayments, would be approximately RM174.17.

Ameera: Alright, thank you for your help so far. Lastly, I'm thinking of settling the loan after
the 40th repayment. Can you tell me the settlement amount at that point?

Syikin: To calculate the settlement amount, we need to find the remaining loan balance after
40 repayments. Then, you can pay off the remaining balance to settle the loan. Let me
calculate that for you.

(After calculating)

Syikin: The amount of settlement after the 40th repayment would be approximately
RM3,128.48.

Ameera: Thank you, Syikin. You've been a great help in clarifying my loan-related queries.

Syikin: You're welcome, Ameera. I'm glad I could assist you. If you have any further questions
or need assistance in the future, feel free to reach out.

Ameera: I appreciate it. Thank you once again!

Syikin: You're welcome, Ameera. Have a great day ahead!