A buyer want to buy a motorcycle on credit at the price of 18,000,000, 3 years tenor with 6% fixed

interest and declining interest is 10%, minimum down payment is 25%, insurance rate 7.5% and
administration fee 300.000.
0, 3 years tenor with 6% fixed
5%, insurance rate 7.5% and
loan principal 18,000,000.00
Insurance Cost 7.50%
Administration cost 300,000
Down Payment 25%
Interest 10% pa Declining Interest
6% pa fixed interest

loan principal 18,000,000.00

Down Payment 4,500,000
Insurance Cost 1350000
Administration cost 300,000
time of installment 12 months
method ADDM ordinary annuity

fixed interest

Principal Installment 1,500,000.00

Interest Installment 90,000.00
Total Installment 1,590,000.00
Actual Credit 11,850,000.00

Period Principal Installment Interest Installment Down Payment

1 4,500,000.00
2 1,500,000.00 90,000.00
3 1,500,000.00 90,000.00
4 1,500,000.00 90,000.00
5 1,500,000.00 90,000.00
6 1,500,000.00 90,000.00
7 1,500,000.00 90,000.00
8 1,350,000.00 90,000.00
9 - -
10 - -
11 - -
12 - -
10,350,000.00 630,000.00

effective interest rate 0.87%

 Based on the above calculations, it c
interest method appears larger than t
and interest that the buyer paid durin
a
Insurance Cost Administration cost Total Installment remaining loan debt

1,350,000.00 300,000.00 7,650,000.00 10,350,000.00

1,590,000.00 8,850,000.00
1,590,000.00 7,350,000.00
1,590,000.00 5,850,000.00
1,590,000.00 4,350,000.00
1,590,000.00 2,850,000.00
1,590,000.00 1,350,000.00
1,440,000.00 -
- -
- -
- -
- -
10,980,000.00
on the above calculations, it can be observed that although the first monthly installment on the declining
method appears larger than the first month installment on the fixed interest method, the total installments
est that the buyer paid during the installment period (ie 12 months) are smaller than the total installments
and interest on the fixed interest method.
 Declining Interest

Principal Installment 1,500,000.00

Interest Installment
Total Installment

Period Principal Installment Interest Installment Down Payment Insurance Cost

1 4,500,000.00 1,350,000.00
2 1,500,000.00 86,250.00
3 1,500,000.00 73,750.00
4 1,500,000.00 61,250.00
5 1,500,000.00 48,750.00
6 1,500,000.00 36,250.00
7 1,500,000.00 23,750.00
8 1,350,000.00 11,250.00
9 - -
10 - -
11 - -
12 - -
10,350,000.00 341,250.00
 Declining Interest Annuity

Principal Installment
Interest Installment
Total Installment

remaining loan
Administration cost Total Installment Period Total Installment
debt
300,000.00 7,650,000.00 10,350,000.00 1
1,586,250.00 8,850,000.00 2 1,582,485.97
1,573,750.00 7,350,000.00 3 1,582,485.97
1,561,250.00 5,850,000.00 4 1,582,485.97
1,548,750.00 4,350,000.00 5 1,582,485.97
1,536,250.00 2,850,000.00 6 1,582,485.97
1,523,750.00 1,350,000.00 7 1,582,485.97
1,361,250.00 - 8 1,193,325.74
- - 9 -
- - 10 -
- - 11 -
- - 12 -
10,691,250.00 10,688,241.56
ning Interest Annuity

1,582,485.97

remaining loan
Interest Installment Principal Installment debt
10,350,000.00
86,250.00 1,496,235.97 8,853,764.03
73,781.37 1,508,704.60 7,345,059.43
61,208.83 1,521,277.14 5,823,782.29
48,531.52 1,533,954.45 4,289,827.83
35,748.57 1,546,737.40 2,743,090.43
22,859.09 1,559,626.88 1,183,463.55
9,862.20 1,183,463.55 -
- - -
- - -
- - -
- - -
338,241.56 10,350,000.00