Answers:

i. 1.44% per month ii. 18.75% per year

7. Madam Annie bought a furniture set cost RM 5,000 by credit. The credit is charged by a simple interest of 0.75% per month and the installment is for two years. The following is the details of the loan, the interest and other cost incurred: Tenure = 24 months The total interest = 24 (0.0075) (5,000) = RM 900 The loan process fees = RM 50 The loan cost = RM 5,000 + RM 900 + RM 50 = RM 5,950 Installment per month= RM (5,950/24) = RM 247.92 per month (i) Calculate the effective interest rate per month and the effective interest rate per year for the loan? (ii) If Madam Anne decides to pay for the installment for 12 months and made a full settlement of the loan, calculate how much is the balance of the laon at the end of 12 months