Assume that your friend is offered a job upon graduation as Junior Executive with yearly fixed income of RM45,600 and need a car to travel for work. His parents agreed to support financial aid maximum of 8% of total price and you managed to come up with 2% deposit from his saving. However, it is insufficient to fully pay the total on the road purchase price of RM 30,000 and came to you for advice. The only way you can advise is to buy the car by take out a car loan. Given the balance amount of the car, the current annual interest rate of hire purchase is 5.5% per annum and he willing to make monthly repayment for 6 years. Help him to determine if he can afford to pay for monthly payment of the loan as the banks allowable credit commitment is at maximum of 35%, whereas he doesnt have other commitment except his credit card charges of RM220 per month to pay his insurance premium.

Requirement:

1. Compute the monthly repayment of the friends car loan? His loan application can be approved? Show the amortization table.

(5 Marks)

2. Determine the total cost and total interest that he have to bare based on loan taken? (5 Marks)

3. Discuss the process of loan amortization and explain the common loan employs amortization in Malaysia.

(5 Marks)

4. Discover TWO benefit of loan amortization for your friend.