MAT112 BUSINESS MATHEMATICS

CHAPTER 5 (ANNUITY)

1. Bell took a loan of RM30,000 from a financial department that charges 4.8%
compounded monthly. Find the number of payments required if he has to pay back
RM480 every month in order to settle the loan. [n=72]

𝟏−(𝟏+𝟎.𝟎𝟎𝟒)−𝒏
30000=480[ 𝟎.𝟎𝟎𝟒
]
-n
0.25=1-(1+0.004)
0.75=(1+0.004)-n
log 0.75= -n log 1.004
-n=-72.06
n=72
(Q2(b) Oct 2012)

2. Ha Dong Hoon has to pay RN25,000 in total to settle a 3 year loan by making equal
monthly payments to a bank. The bank charges him 6% compounded monthly.
i) How much is the monthly payment? [RM635.55]

𝑹
25000= [(1+0.005)36-1]
𝟎.𝟎𝟎𝟓
R=RM635.55

ii) If he fails to pay the first five monthly payments, find the amount he has to pay on the
sixth payment in order to settle the outstanding arrears. [RM3861.29]

𝟔𝟑𝟓.𝟓𝟓
S= 𝟎.𝟎𝟎𝟓 [(1+0.005)6-1]
=RM3861.29

iii) After paying the 30th payment, he wants to settle the loan in full. Find the outstanding
principal balance. [RM3747.45]

𝟔𝟑𝟓.𝟓𝟓
A= 𝟎.𝟎𝟎𝟓 [1-(1+0.005)-6]

=RM3747.45
(Q2(c) Oct 2012)

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 3. Amri bought a car by making a down payment of RM10000 and had to settle monthly
payments of RM828.70 for 84 months.
i) If the money was worth 3.75% compounded monthly, find the cash price of the
car. [RM71140.50]

𝟖𝟐𝟖.𝟕𝟎
S=𝟎.𝟎𝟎𝟑𝟏𝟐𝟓[(1+0.003125)84-1]
=RM79460.90

79460.90=P(1+0.003125)84
P=RM61140.49

Cash Price= 61140.49+10000

=RM71140.49

ii) If Amri did not pay the first 10 repayments, how much should he pay on the 11th
month to settle the arrears? [RM9295.48]

𝟖𝟐𝟖.𝟕𝟎
S= [(1+0.003125)11-1]
𝟎.𝟎𝟎𝟑𝟏𝟐𝟓

=RM9259.48
(Q2(b) March 2012)

4. Johan saves RM250 every three months for 7 years into an account that pays 3%
compounded quarterly.
i) How much does Johan have at the end of 7 year period? [RM7757.06]

𝟐𝟓𝟎
S=𝟎.𝟎𝟎𝟕𝟓[(1+0.0075)28-1]

=RM7757.06
ii) How much is the interest earned? [RM757.06]

RM250×28=RM7000
I=7757.06-70000
=RM757.06

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 iii) After 7 years, no more deposit was made. Find the amount of the account at the
end of another 5 years period? [RM9007.38]
(Q2(b) March 2012)
20
S=7757.06(1+0.0075)
=RM9007.38

5. Three years ago Rozman invested RM11,827.40 in a saving account at 8%

compounded quarterly. He used all the amount in the account to pay a deposit for a
degree program at a private university.
i) Find the deposit amount that that Rozman paid for the degree program.
(RM15,000)
S=11827.40(1+0.02)12
=RM15,000

ii) Upon entering the university Rozman secured a loan at RM65,000 at 3%

compounded monthly. He agreed to pay back the loan by monthly installment for 10
years. Find the monthly installment. (RM627.64)
(Q2(c) Sept2011)
120
S=65000(1+0.0025)
=RM87707.98

𝑹
87707.98=𝟎.𝟎𝟎𝟐𝟓[(1+0.0025)120-1]
35083192=R[(1+0.0025)120-1]
R=RM627.64

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