UNIVERSITI MALAYSIA PERLIS

BQT 133 Business Mathematics

Tutorial 2 (Financial Mathematics)
1. An amount of RM2000 is invested in a 10 year trust fund that pays 6% annual simple
interest. What is the total amount of the trust fund at the end of 10 years?
2. Malik has been given the option of either paying his RM 300 bill now or settling it
for RM306 after 1 month. If he chooses to pay after 1 month, find the simple interest
rate which he would be charged.
3. To help finance the purchase of a new house, the Abdullah have decided to apply for
a short-term loan in the amount of RM120,000 for a term of 3 month. If the bank
charges simple interest at the rate of 10% per year, how much will the Abdullah owe
the bank at the end of the term?
4. Maya paid RM10,000 for a 7 year bond issued by a city. She received interest
amounting to RM3500 over the life of the bonds. What rate of simple interest did the
bond pay?
5. If the cost of a semiprivate room in a hospital was RM 480 per day five years ago
and hospital cost have risen at the rate of 8% per year since that time, what rate
would you expect to pay for a semiprivate room today?
6. Tun is planning to by a house 4 years from now. Housing experts in their area have
estimated the cost of a home will increase at a rate of 5% per year during that period.
If this economic prediction holds true, how much can Tun expect to pay for a house
that currently costs RM210000?
7. Jolie invested RM15000 in a mutual fund 4 year ago. If the fund grew at the rate of
9.8 % per year compounded monthly, what would Jolie account be worth today?
8. Find how much money should be deposited in a bank paying interest at the rate of
8.5% per year compounded quarterly so that, at the end of 5 years, the accumulated
amount will be RM40000.
9. The parents of a child have just come into a large inheritance and wish to establish a
trust fund for her college education. If they estimate that they will need RM100000
in 13 years, how much should they set aside in the trust now if they can invest the
money at 8.5% per year compounded (a) annually (b) semi-annually (c) quarterly

10. In the last 5 years, Bendix Mutual Fund grew at the rate of 10.4% per year
compounded quarterly. Over the same period Acme Mutual Fund grew at the rate of
10.6% per year compounded semi-annually. Which mutual fund has a better rate of
return?
11. George purchased a house in 2000 for RM 200000. In 2006 he sold the house and
made a net profit of RM 56000. Find the effective annual rate of return on her
investment over the 6 year period.
12. Online retail sales stood at RM 23.5 billion for the year 2000. For the next years,
they grew by 33.2% and 27.8% per year, respectively. For the next 6 years, online
retail sales are projected to grow at 30.5%, 19.9%, 24.3%, 14%, 17.6% and 10.5%
per year, respectively. What are the projected online sales for 2008?
13. Investment A offers a 10% return compounded semi-annually and investment B
offers a 9.75% return compounded continuously. Which investment has a higher rate
of return over a 4 year period?
14. Serena invested RM300 every three month for four years. She was offered
5% compounded quarterly for the first two years
8% compounded quarterly for the rest of the period
Find the accumulated amount at the end of four years.
15. The table below shows the monthly deposits that were made into an investment
account by John
Year
1994
1995
1996

Monthly Deposits
RM500
RM400
RM700

Find the value of his investment at the end of 1996 if the investment rate is 12%
compounded monthly.

16. The table below shows the monthly deposits made by Yusof for the year 1990
through 1992
Year
Monthly Deposits
1990
RM100
1991
RM150
1992
RM200
Assume the investment pays 8% compounded monthly
i.
Find the accumulated amount in the account at the end of 1992
ii.
Yusof withdrew an equal amount at the end of each month, beginning January
1993. If he withdrew for three years, find the size of these withdrawals?
17. Mariana borrowed RM100000 at 4% compounded monthly. She has to repay the
loan by making 60 monthly payments.
i.
Find her monthly payments
ii.
If she has not paid her first 15 monthly payments, how much should she pay
on her 16th payment to settle all outstanding arrears?
18. David wants to go to a university to complete a course in four year time. He
estimates that he needs RM40000 to finish the course. How much must he invest in a
bank every month for the next four years at 9% compounded monthly to accumulate
the stated amount?
19. Immediately after retiring, Arthur intends to withdraw RM500 every month from an
investment account that pays 8% compounded monthly. If he can made withdrawals
for 20 years, find the amount that was invested just before he retired.
20. Ah Chong intends to accumulate RM10000 by depositing RM650 every six months
into an account that pays 5% compounded semi-annually
i.
ii.

How many full deposits of RM650 must he have?

Find the additional amount that must be saved together with the final full
deposit so that he will have RM10000

21. Ramu bought a piece of land for RM30 460.16. He made a down payment of
RM10000 and the balance was financed through a bank. He had to pay RM 400 a
month to settle the loan.
i.
If the bank charges 12% compounded monthly, determine the number of
payments that will settle the loan
ii.
After paying the first 47 monthly payments, Ramu settled the loan by making
a final payment on the 48th payment. Find the value of this payment. What is
the total interest that he had to pay?

22. RM 700 was invested every month in an account that pays 5% compounded annually
for eighteen months. Calculate the amount in the account after 22 months.
23. Benny won an annuity which pays RM150 at the beginning of each month for thirty
months, the first payment begins now. What is the present value of the annuity if
money is worth 12% compounded monthly?
24. Jackie purchases a piano for RM7000. She pays RM2000 down and agrees to pay the
balance in 15 equal monthly payments, the first due in one month. If the dealer
charges her 5% compounded monthly, find her monthly payment.
25. Noel wants to provide a scholarship of RM2000 each year for the next three years.
The scholarship will be awarded at the end of each year to the best student in
UniMAP. If money worth 10% compounded annually, find the amount that must be
invested now so that it can provide the three scholarships.
26. In discharging a debt of RM 20000 at 4% compounded annually, Rosalinda agrees to
make five equal payments for the first five years and the last final payment of
RM5000 on the sixth year. Find these five equal payments.
27. Ang is buying a new photocopy machine from Conan Copiers for RM45000. To
finance his purchase, he trades in his old photocopy machine for RM20000 and takes
a loan RM25000 from a bank at 6% compounded monthly
i.
If Ang intends to settle his debt in 5 years, how much must he repay the bank
monthly?
ii.
Immediately after making 12 repayments, Ang wants to sell off his photocopy
machine
a) If the bank requires him to settle his outstanding debt in one payment, how
much must he repay to the bank?
b) How much does Ang have to pay if bank allows him to repay in two equal
instalments but at 8% interest compounded monthly and the repayments
are to be made at the end of the second and third year after selling off the
machine.
28. Nadia intends to get married in eight years time. She estimates that the cost of the
wedding will be RM20000 then. She intends to save this amount by making equal
monthly deposits at the end of each month in a bank that pays 5% compounded
monthly
i.
How much will this monthly deposit be?
ii.
After paying for two years, that estimated cost of the wedding has gone up to
RM30000
a) What should be the new monthly deposits?
b) In instead of making the additional monthly deposits, Nadia decides
to make a lump sum deposit X at the end of two years, calculate the
value of X

29. Mimi saved RM500 every month for four years in ABC finance that paid 4%
compounded quarterly. The account was left until the end of the 6 th year where he
withdrew half of the amount and invested in XYZ finance at 10% compounded
monthly. Both the accounts were left untouched for another four years.
i.
Find the amount of the account in ABC finance at the end of ten years.
ii.
Find the amount of the account in XYZ finance at the end of ten years if XYZ
finance increased the saving rate to 12% compounded monthly the last two
years.
30. A machine costing RM27000 has a life expectancy of 5 years and zero salvage value.
Using the straight line method, compute
i.
The annual depreciation
ii.
The book value at the end of 3 years.
31. Good Fortune Company bought a lorry for RM60000. The lorry is expected to last 5
years and its salvage value at the end of 5 years is RM20000. Using the straight line
method
i.
Calculate the annual depreciation
ii.
Calculate the annual rate of depreciation
iii.
Calculate the book value of the lorry at the end of second year
32. Shamlin Company bought a computer for RM15000. The computer is expected to be
obsolete in 5 years with a salvage value of RM500. Find the book value of the
computer at the end of 2 years using the straight line method.
33. A set of office furniture was purchased for RM9850 in 2000. The estimated salvage
value at the end of 10 years is RM500. Prepare the depreciation schedule until 2004
using the straight line method.
34. A new equipment costing RM2100 is purchased. Using declining balance rate of
20%
i. Prepare a depreciation schedule for the first 3 years of use
ii. What is the book value at the end of 6 years?
35. Amran bought a new car for RM43500. He uses the declining balance method for
computing depreciation. If he uses an annual depreciation rate of 16% calculate the
accumulated depreciation of the car at the end of 4 years.
36. An asset costing RM2000 depreciated at a rate of 20%. How long does it take the
asset to have a salvage value of RM500?
37. A machine costing RM27000 has a life expectancy of 5 years and salvage value of
RM7000. Using the sum of years digits method, compute the book value at the end
of 3 years.

38. Using the sum of years digits method, calculate the cost of an asset if the useful life
of the asset is 5 years, its salvage value is RM900 and the depreciation for the second
year is RM560.
39. Given the following information on an asset,
Book value at the end of third year
=RM11763
The estimated useful life of the asset
=20 years
Accumulated depreciation at the end of twentieth year =RM134000
Calculate by using the sum of years digits method
i. The original cost of the asset.
ii. The salvage value of the asset.
40. A machine costing RM5400 has a life expectancy of 6 years with a salvage value of
RM1200. Construct a depreciation schedule using
i.
The straight line method
ii.
The sum of years digits method
41. Kamal wants to sell a jeep which has been used for 8 years. The vehicle cost him
RM62000 when it was purchased brand new. The jeep is estimated to have a scrap
value of RM8000 after 15 years. He asked two agents to sell hi vehicle. Agent A uses
the sum of years digits method to calculate depreciation while agent B uses the
reducing balance method.
i.
Construct the depreciation schedule for the first 8 years.
ii.
Which agent should Kamal choose to sell his jeep?

Answer tutorial 2
1.
2.
3.
4.
5.
6.
7.
8.
9.

RM3200
24 %
123000
5%
705.28
255256
22163.75
26267.49
(a) 34626.88 (b) 33886.16 (c)
33506.76
10. Acme Mutual fund
11. 4.2%
12. 115.3 billion
13. A
14. 5513.03
15. 22645.84
16. (i) 5972.72 (ii) 187.4
17. (i) 1841.65 (ii) 30214.64
18. 695.40
19. 59777.15
20. (i) 13 full (ii) 158.71
21. (i) 72 payments (ii) 8897.35
22. 13259.87
23. 3909.87
24. 344.55
25. 4973.70
26. 3604.91
27. (i)483.32 (ii) a 20579.92 b)11588.07
per instalment
28. (i)169.87 (ii) a) 289.25 b)7412.80
29. (i) 5478.23 (ii) 7239.53
30. (i) 5400 (ii) 10800
31. (i)8000 (ii)20% (iii)44000
32. 9200

33.
Year

Annual
Depreciation(RM)

Accumulated
Depreciation (RM)

Book Value (RM)

2000
2001
2002
2003
2004
34. (i)
Year

0
935
935
935
935

0
935
1870
2805
3740

9850
8915
7980
7045
6110

Annual
Depreciation(RM)
0
420
336
268.80

Accumulated
Depreciation (RM)
0
420
756
1024.80

Book Value (RM)

0
1
2
3
(ii)505.50
35. 21842.60
36. 6.2 years
37. 11000
38. 3000
39. (i) 15400.14 (ii)2000.14
40.

2100
1680
1344
1075.20