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The Principles and Practices of Shariah in Islamic Finance - page 28 / 49

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Illustration 11: Determination of Settlement Amount

An Islamic bank provides Murabahah financing for the purchase of equipment that cost RM100,000. A 10% deposit was paid by the customer to the bank when the purchase order was made. The bank sold to the customer at RM117,614.36 for a financing period of 3 years at12% per annum. The mark-up after deducting the deposit is RM17,614.36. The following table summarises the financial data.

Purchase Price

RM100,000.00

Deposit (10%)

RM10,000.00

Disbursement (90%)

RM90,000.00

Financing Rate (12% per annum)

Period (36 months)

Monthly Payment

RM2,989.29

Selling Price

RM117,614.36

Mark-up

RM17,614.36

Month

Payment

Income

Principal

Deferred

Balance

Profit

24

RM2,989.29

RM362.71

RM33,644.67

RM2,226.79

At the end of 24 months the payment schedule is reported as follows:

The customer wishes to settle the whole debt on the 24th month. The total amount payable including deferred profit is RM35,871.46. The bank may allow a rebate of RM2,226.79.

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