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February 11th, 2014, 01:01 PM   #1
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Financial Mathematics (Amortization)

A company purchases an equipment at a price of RM368000 and makes a down payment of 10% of the purchase price. The company amortises the balance with 360 monthly payments at an annual interest of 4.5% which is compounded monthly.

I found that monthly payment is RM1678.14 and total interest payable is RM272930.40.


If the company does not settle the first six monthly payments, determine the total amount payable on the seventh month. Assume no extra charge on late payment.
^I don't really understand the question or is it a trick (because it's 5 marks so may not easy as thought?)
I even make an amortization schedule...
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February 11th, 2014, 09:16 PM   #2
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Re: Financial Mathematics (Amortization)

It's not a trick.
Owing will be the future value of 7 monthly payments of 1678.14, at same interest rate.
Formula:
f = p[(1 + i)^n ? 1] / i

f = future value (?)
p = monthly payment (1678.14)
i = monthly interest rate (.045/12)
n = number of months (7)
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February 11th, 2014, 10:50 PM   #3
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Re: Financial Mathematics (Amortization)

So it's just as easy as apply the FV of an annuity formula and it's 5 marks??

The answer is RM11879.96 right? Thank you so much
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February 12th, 2014, 05:29 AM   #4
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Re: Financial Mathematics (Amortization)

Quote:
Originally Posted by ystiang
The answer is RM11879.96 right?
Yes...
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