KEMENTERIAN

PENDIDIKAN
MALAYSIA
_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Institut Pendidikan Guru Kampus Pendidikan Teknik, Negeri Sembilan

JABATAN MATEMATIK

Nama Pelajar PANG SIEW WEI

Angka Giliran

No Kad Pengenalan

Kumpulan/Unit 2 PISMP RBT2

Kod & Nama Kursus MTES3043 FINANCIAL MATHEMATICS

Nama Pensyarah PN HASLINA BINTI JAAFAR

Tarikh Hantar 26.02.2021

Pengakuan pelajar menerima maklum balas daripada pensyarah

Saya mengesahkan bahawa maklum balas yang diberikan oleh pensyarah telah saya
rujuki dan fahami.
Catatan (jika ada)

Tanda tangan Pelajar: Tarikh:

Markah:

1
 INSTITUT PENDIDIKAN GURU
KAMPUS PENDIDIKAN TEKNIK

BORANG MAKLUM BALAS KERJA KURSUS

Nama: PANG SIEW WEI Angka Giliran:

Kod: MTES3043 Nama Kursus: FINANCIAL

MATHEMATICS
Pensyarah: PN HASLINA BINTI JAAFAR
Tarikh Hantar: 26 FEBRUARY 2021 Tarikh Terima (Diisi oleh pensyarah)

Pengakuan Pelajar
Saya mengaku bahawa kerja kursus ini adalah hasil kerja saya sendiri kecuali
nukilan dan ringkasan yang setiap satunya saya jelaskan sumbernya.

Tandatangan Pelajar: Tarikh:

Perincian Maklum Balas Kerja Kursus

Pemeriksa Moderator (jika berkaitan)
Kekuatan: Kekuatan:

Aspek yang boleh diperbaiki: Aspek yang boleh diperbaiki:

Tandatangan: Tarikh: Tandatangan: Tarikh:

Pengesahan Pelajar
Saya mengesahkan bahawa maklum balas yang diberikan oleh pensyarah telah
saya rujuki dan fahami.

Catatan (jika ada)

Tandatangan Pelajar: Tarikh:

2
 Table of Contents Pages
1.0 INTRODUCTION 4
2.0 LOAN PLANS 4-33
3.0 MAKING DECISION IN CHOOSING A BETTER PLAN 33
4.0 CONCLUSION 33
BIBLIOGRAPHY 34
ATTACHMENT 35

1.0 INTRODUCTION

3
What is financial mathematics? It describes the application of mathematics and
mathematical modeling to solve financial problems. It is prominent to our daily life.
Nowadays, various types of organizations and financial service providers make use
of financial mathematics as part of their core operations, such as investment banks,
retail and commercial banks, hedge funds, investment management companies and
the others.

To apply financial mathematics in our daily life, in this assignment I am asked

to write a report and construct various loan plans to convenience the decision making
in daily financial problems. Based on the situation given, Ms. Madihah plans to buy a
new house for RM480 000 with a down payment of RM30 000 and she needs to
collect loan information from financial institutions. Therefore, I provide various loan
plans dan repayment plans from different banks so that Ms. Madihah can make wise
decision.

2.0 LOAN PLANS

2.1 SITUATION 1

Ms. Madihah plans to buy a new house for RM480000 with a down payment of
RM30000. She collects loan information from Bank X. Bank X offers instalment
payments for 30 years. The interest rate of 2.97% is compounded monthly.

From the information given,

Total cost of house = RM 480000.00

Down Payment = RM 30000.00

Interest = 2.97%

r
i=
m

0.0297
i=
12

i=0.002475

Tenure = 30 years

n=t × m

4
n=30 ×12 = 360

First, calculate the amount of loan, P:

Amount of loan, P

= RM 480000.00 – RM 30000.00

= RM 450000.00

Then, calculate the monthly payment:

Pi
Monthly payment, R=
1−(1+i)−n

450000(0.002475)
R= −360
1−(1+0.002475)

R=RM 1889.95

After that, calculate the total amount of loan:

Total amount of loan

¿ monthly payment × n

¿ RM 1889.95 ×30 ×12

¿ RM 680382.00

Next, find the interest paid:

Interest paid

= Total amount of loan – Amount of loan

= RM 680382.00 - RM 450000.00

= RM 230382.00

Then, calculate the monthly interest, principle amount and ending balance for the first
three months.

5
The first month:

Beginning balance of the first month = RM 450000.00

Monthly payment = RM 1889.95

0.0297
Monthly interest = 450000 ×
12

= RM 1113.75

Principle amount = Monthly payment – Monthly interest

= RM 1889.95 - RM 1113.75

= RM 776.20

Ending balance of the first month = Beginning balance – Principle amount

= RM 450000.00 – RM 776.20

= RM 449223.80

The second month:

Beginning balance of the first month = RM 449223.80

Monthly payment = RM 1889.95

0.0297
Monthly interest = 449223.80 ×
12

= RM 1111.83

Principle amount = Monthly payment – Monthly interest

= RM 1889.95 - RM 1111.83

= RM 778.12

Ending balance of the first month = Beginning balance – Principle amount

= RM 449223.80 – RM 778.12

= RM 448445.68

The third month:

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Beginning balance of the first month = RM 448445.68

Monthly payment = RM 1889.95

0.0297
Monthly interest = 448445.68 ×
12

= RM 1109.90

Principle amount = Monthly payment – Monthly interest

= RM 1889.95 - RM 1109.90

= RM 780.05

Ending balance of the first month = Beginning balance – Principle amount

= RM 448445.68 - RM 780.05

= RM 447665.63

After that, build an amortization table using computer software, Microsoft Excel.

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8
9
10
11
12
13
 There are a little bit differences in amount between the calculation manually
and the calculation using computer software. This is because we round off the
decimal numbers when we calculate manually. Therefore, the result of the calculation
using computer software is more accurate than the calculation manually.

From the amortization table above, the amount of loan is paid off in the 360 th
month. The monthly payment is always fixed, which is RM 1889.95. Through
observation, the monthly interest is decreased due to the time increased. In contrast,
the principle amount is increased due to the time increased. For example, in the first
month, the monthly interest is RM 1113.75 and the principle amount is RM 776.20. In
the 300th month, the monthly interest is RM 264.54 and the principle amount is RM
1625.41. Besides, the ending balance of the month is carried forward to the next
month as the beginning balance. For instant, the beginning balance of the second
month is RM449,223.80 which is same as the ending balance of the first month.

2.2 SITUATION 2

Ms. Madihah plans to buy a new house for RM480000 with a down payment of
RM30000. She collects loan information from Bank Y. Bank Y offers instalment
payments for 25 years. The interest rate of 3.25% is compounded monthly.

From the information given,

Total cost of house = RM 480000.00

Down Payment = RM 30000.00

Interest = 3.25%

r
i=
m

0.0325
i=
12

i=0.0027083

Tenure = 25 years

n=t × m

n=25 ×12 = 300

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First, calculate the amount of loan, P:

Amount of loan, P

= RM 480000.00 – RM 30000.00

= RM 450000.00

Then, calculate the monthly payment:

Pi
Monthly payment, R= −n
1−(1+i)

450000(0.0027083)
R=
1−(1+0.0027083)−300

R=RM 2192.92

After that, calculate the total amount of loan:

Total amount of loan

¿ monthly payment × n

¿ RM 2192.92× 25 ×12

¿ RM 657876.00

Next, find the interest paid:

Interest paid

= Total amount of loan – Amount of loan

= RM 657876.00 - RM 450000.00

= RM 207876.00

Then, calculate the monthly interest, principle amount and ending balance for the first
three months.

The first month:

15
Beginning balance of the first month = RM 450000.00

Monthly payment = RM 2192.92

0.0325
Monthly interest = 450000 ×
12

= RM 1218.75

Principle amount = Monthly payment – Monthly interest

= RM 2192.92 - RM 1218.75

= RM 974.17

Ending balance of the first month = Beginning balance – Principle amount

= RM 450000.00 – RM 974.17

= RM 449025.83

The second month:

Beginning balance of the first month = RM 449025.83

Monthly payment = RM 2192.92

0.0325
Monthly interest = 449025.83 ×
12

= RM 1216.11

Principle amount = Monthly payment – Monthly interest

= RM 2192.92 - RM 1216.11

= RM 976.81

Ending balance of the first month = Beginning balance – Principle amount

= RM 449025.83– RM 976.81

= RM 448049.02

The third month:

Beginning balance of the first month = RM 448049.02

16
Monthly payment = RM 2192.92

0.0325
Monthly interest = 448049.02 ×
12

= RM 1213.47

Principle amount = Monthly payment – Monthly interest

= RM 2192.92 - RM 1213.47

= RM 979.45

Ending balance of the first month = Beginning balance – Principle amount

= RM 448049.02- RM 979.45

= RM 447069.57

After that, build an amortization table using computer software, Microsoft Excel.

17
18
19
20
21
There are a little bit differences in amount between the calculation manually and the
calculation using computer software. This is because we round off the decimal
numbers when we calculate manually. Therefore, the result of the calculation using
computer software is more accurate than the calculation manually.

From the amortization table above, the amount of loan is paid off in the 300 th
month. The monthly payment is always fixed, which is RM2192.92. Through
observation, the monthly interest is decreased due to the time increased. In contrast,
the principle amount is increased due to the time increased. For example, in the first
month, the monthly interest is RM 1218.75 and the principle amount is RM 974.17. In
the 200th month, the monthly interest is RM RM524.19 and the principle amount is
RM RM1,668.73.

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2.3 SITUATION 3

Ms. Madihah plans to buy a new house for RM480000 with a down payment of
RM30000. She collects loan information from Bank Z. Bank Z offers instalment
payments for 30 years. The interest rate of 3.60% is compounded monthly. However,
bank Z offers promotion in the first 5 years, that is the interest rate is reduced to
3.00% and is compounded monthly.

From the information given,

Total cost of house = RM 480000.00

Down Payment = RM 30000.00

Normal interest = 3.60%

Interest for the first 5 years = 3.00%

r
i=
m

0.03
i p=
12

i p=0.0025

0.036
i=
12

i=0.003

Tenure = 30 years

n=t × m

n=30 ×12 = 360

First, calculate the amount of loan, P:

Amount of loan, P

= RM 480000.00 – RM 30000.00

= RM 450000.00

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Then, calculate the monthly payment for the first 5 years:

Pi
Monthly payment, R=
1−(1+i)−n

450000(0.0025)
R=
1−(1+0.0025)−360

R=RM 1897.22

Next, calculate the amount of loan after 5×12 = 60 payments:

1−(1+i)−n
P=R { Pi }
−300
1−(1+0.0025)
P=1897.22 { 0.0025 }
P=RM 400079.02

Then, calculate the monthly payment for the remaining years:

400079.02( 0.003)
R=
1−(1+0.003)−300

R=RM 2024.42

After that, calculate the total amount of loan:

Total amount of loan

¿ monthly payment × n

¿ ( RM 1897.22× 5 ×12 ) +( RM 2024.42 ×25 ×12)

= RM 113833.20 + RM 607326

= RM 721159.20

Next, find the interest paid:

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Interest paid

= Total amount of loan – Amount of loan

= RM 721159.20 - RM 450000.00

= RM 271159.20

Then, calculate the monthly interest, principle amount and ending balance for the first
three months.

The first month:

Beginning balance of the first month = RM 450000.00

Monthly payment = RM 1897.22

0.03
Monthly interest = 450000 ×
12

= RM 1125.00

Principle amount = Monthly payment – Monthly interest

= RM 1897.22 - RM 1125.00

= RM 772.22

Ending balance of the first month = Beginning balance – Principle amount

= RM 450000.00 – RM 772.22

= RM 449227.78

The second month:

Beginning balance of the first month = RM 449227.78

Monthly payment = RM 1897.22

0.03
Monthly interest = 449227.78 ×
12

= RM 1123.07

Principle amount = Monthly payment – Monthly interest

25
 = RM 1897.22 - RM 1123.07

= RM 774.15

Ending balance of the first month = Beginning balance – Principle amount

= RM 449227.78– RM 774.15

= RM 448453.63

The third month:

Beginning balance of the first month = RM 448453.63

Monthly payment = RM 1897.22

0.03
Monthly interest = 448453.63 ×
12

= RM 1121.13

Principle amount = Monthly payment – Monthly interest

= RM 1897.22 - RM 1121.13

= RM 776.09

Ending balance of the first month = Beginning balance – Principle amount

= RM 448453.63- RM 776.09

= RM 447677.54

After that, build an amortization table using computer software, Microsoft Excel.

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27
28
29
30
31
There are a little bit differences in amount between the calculation manually and the
calculation using computer software. This is because we round off the decimal
numbers when we calculate manually. Therefore, the result of the calculation using
computer software is more accurate than the calculation manually.

32
 From the amortization table above, the amount of loan is paid off in the 360 th
month. The monthly payment is not fixed. Through observation, the monthly interest
is decreased due to the time increased. In contrast, the principle amount is increased
due to the time increased. Although the monthly payment is not fixed, as time
passes, the interest portion decreases, and greater values of principal are repaid
gradually.

3.0 MAKING DECISION IN CHOOSING A BETTER PLAN

After comparing the loan plan provided by three plans, I suggest Puan Madihah to
choose Bank Y to make her housing loan payment. There are a few reasons that I
make this suggestion. First of all, by comparing the interest paid of the three banks,
the interest paid by bank Y is the lowest that is, RM207,876.90. Secondly, the tenure
for the instalment payments of Bank Y is the lowest, that is 25 years. This means that
if Puan Madihah choose bank Y to make her housing loan payment, she can pay off
the loan in a shorter time.

Furthermore, although Bank Z is giving promotion, after compounded monthly

by 30 years, the total amount of interest paid is the highest among the three banks,
that is RM271,155.71. Therefore, it is unworthy for Puan Madihah to choose Bank Z
as the bank for her to make her housing loan payment. Moreover, since 2 types of
interest rates are given by Bank Z, Puan Madihah maybe will be confused when
paying the housing loan. Although the interest rate of Bank X is the lowest, after
compounded monthly by 30 years, the total amount of interest paid is still higher than
bank Y.

In short, Puan Madihah should choose Bank Y to make her housing loan
payment to benefit herself.

4.0 CONCLUSION

In a nutshell, financial mathematics really important in our daily life, not only
for those who are doing business. Without the theories that introduced in the financial
mathematics, we probably will be treated by some cunning organizations and
financial service providers. Therefore, as a future teacher, I have the responsibility to
fulfill myself with the knowledge of financial mathematics, so that I can teach my
students as well as I could in the future.

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BIBLIOGRAPHY

Corporate Finance Institute. (n.d.) Financial Mathematics. Retrieved from

https://corporatefinanceinstitute.com/resources/knowledge/finance/financial-
mathematics/.

https://www.housingwatch.my/05_02_guide_housingloan.html

https://www.imoney.my/home-loan#.

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ATTACHMENT

ATTACHMENT 1: Asking sister who makes housing loan at Public Bank

ATTACHMENT 2: Surfing internet to find the logic interest rate

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