INSTALMENT

PURCHASES PREPARED BY
NURUL AIN BINTI MOHD FAISAL
NUR AIN FATIHAH BINTI SHAMSUDIN
NUR ERINA ILYANA BINTI ABDUL FATTAH
NUR ATIKAH BINTI KAMARAZAMAN
 GROUP MEMBERS

NAME : NURUL AIN BINTI MOHD FAISAL

MATRIX NUMBER : 2018672258

NAME : NUR AIN FATIHAH BINTI SHAMSUDIN

MATRIX NUMBER : 2018639634
 GROUP MEMBERS

NAME : NUR ATIKAH BINTI KAMARAZAMAN

MATRIX NUMBER : 2018270342

NAME : NUR ERINA ILLYANA BINTI ABDUL FATTAH

MATRIX NUMBER : 2018239348
 WHAT IS INSTALMENT?
◦ A purchase which a down payment is made and the balance is settled by a
series of regular payments
◦ When a buyer purchase a product, the buyer can enjoy the use of the
product and at the same time pays for it in periodic payments (usually
monthly or weekly) called Instalments.
◦ In reality, installment buyer actually pay more compare to the cash price of
the products. That’s why, there are many retailers who sell their products
based on the instalments basis. The reasons why installments buyer pay
more is because of the charges charged like interest rate charges and etc.
 FORMULAS
INSTALMENT PRICE TOTAL INTEREST
BALANCE
IP = DP + R(n) I = R(n) – B
B = CP - DP
= CP + I = Brt / Prt

Where;
CONSTANT RATIO/ IP – Instalment Price r – interest rate
REDUCING BALANCE DP – Down payment t – time ( years )
FORMULA CP – Cash Price m - frequency
rB (n+1) R – Monthly Payment ( monthly - 12
I= B – Balance weekly – 52 )
2m
I – Total Interest
n – Number of payment
 RULE OF 78
OUTSTANDING PRINCIPLE BALANCE

k(k+1) Where;
OPB = R(k) – I n(n+1) OPB – outstanding principle balance
R – Monthly Payment
k – number of unpaid payment
n – number of payment

UNEARNED INTEREST

k(k+1)
I n(n+1)
 APPLICATION
PROBLEMS :
Daniel bought a Daihatsu Gran Max 1.5 Lorry for his new business. The lorry listed at RM
34 800 and he bought it through an instalment plan with 10% down payment. Monthly
payment was made for 5 years and the interest charged on the original balance is 4.5 % per
annum. Find ;
a) the total interest charged
b) The monthly payment,
c) The instalment price
d) The outstanding balance if Daniel decided to settle the balance after making the 36th
payment ( use Rule of 78 )
e) The interest rate using Constant Ratio Formula
Daihatsu Gran Max 1.5 Lorry Instalment plan
 SOLUTION
So from the question, we know that ;

CP = RM 34 800 r =0.045

DP = 10 % x RM 34 800 t=5
= RM 3 480 n = 5 x 12
= 60
B = CP – DP
= RM 34 800 – RM 3 480
= RM 31 320
a) The total interest charged

I = Brt
TOTAL INTEREST
= RM 31 320 × 0.045 × 5
I = R(n) – B √
= RM 7 047
= Brt / Prt √

I = R (n) – B
b) The monthly payment
RM 7 047 = R ( 60 ) – RM 31 320
R ( 60 ) = RM 7047 + RM 31 320
R = RM 38 367
60
R = RM 639.45
c) The instalment price

INSTALMENT PRICE IP = DP + R ( n )
IP = DP + R(n) √ = RM 3 480 + RM 639.45 ( 60 )
= CP + I √ = RM 41 847

IP = CP + I
= RM 34 800 + RM 7 047
= RM 41 847
 d) The outstanding balance if Daniel decided to settle the balance after making the 36th payment
( use Rule of 78 )
OUTSTANDING PRINCIPLE BALANCE
k = number of unpaid payment
k = 60 – 36 k(k+1)
OPB = R(k) – I n(n+1)
= 24

OPB = RM 639.45 ( 24 ) – RM 7 047 24 ( 24 + 1)

60 ( 60 + 1)

= RM 639.45 ( 24 ) – RM 7 047( 0.16393 )

= RM 15 346.80 – RM 1 155.21
= RM 14 191.59
e) The interest rate using Constant Ratio Formula

CONSTANT RATIO/
REDUCING BALANCE RM 7 047 = r × RM 31 320 × ( 60 + 1 )
METHOD 2 ( 12 )
I = rB (n+1) RM 7 047 ( 24 ) = r × RM 1910520
2m
r= RM 169 128
RM 1 910 520
r = 8.85%
 REFERENCES
◦ https://m.mudah.my/view?ca=9_3_s&cg=1015&q=Lorry+&catname=Cars&f=
a&srch=1&so=1&ps=false&pe=false&ad_id=70324415
◦ Lau Too Kya (2015). Business Mathematics for UiTM 5th Edition