Tutorial Instalment Purchase and Mathematics of Trading

1. After paying RM400 as down payment for a kitchen cabinet, Sharon paid RM125 a
month for 2 years for the balance. The interest charged on the original balance was 4%.
i) Determine the cash price of the kitchen cabinet and the total interest paid.
ii) Find the amount of interest using the Constant Ratio formula.
2. The cash price of an electric stove is RM4,200. On an installment plan, a 15% down
payment is required followed by monthly payments for 2 years. If the interest charged is
9% on the reducing balance, find the
i) interest charged using the Constant Ratio Formula,
ii) monthly payment,
iii) total amount a customer will eventually pay for the electric stove.
3. Cheng bought a bedroom set at 2,700 cash by installment. He was charged an interest
rate of 15% based on the reducing balance. He has to pay a down payment of RM500
and equal monthly payments for 2 years. Find
i) the monthly payment using the Constant Ratio Formula,
ii) the installment price.
4. Farah wishes to buy a house that costs RM650,000 and she has two banks to consider
to finance her house.
BANK X BANK Y
Down payment RM30,000 10% of cash price
Interest rate 4.3% based on original 4.5% based on reducing
balance balance
Period of payment 420 months
Mode of payment Monthly

For each bank, calculate the

i) interest charged,
ii) monthly payment,
iii) the installment price.
iv) Based on the installment price, which bank should Farah choose? Why?

5. Ikram paid RM5,500 for a piano with trade discounts of 12% and 8%. Find
i) the list price.
ii) the amount of discount.

6. A retailer received an invoice dated 26th February 2016 amounted to RM27,780 including
a prepaid handling charge of RM780. The supplier offered trade discount rate of 15%
and 8% and cash discount terms 10/10, 7/15, n/25.
i) Explain the cash discount terms 10/10, 7/15, n/25.
ii) Calculate the single discount equivalent rate to the given trade discounts.
iii) If the payment was made on 8th March 2016, find the total payment.