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=
i
i
A PV
n
) 1 (
1
1
year 1st for 300,000 * 8%
Principal * i interest
=
=
Conventional accounting
at drawdown Dr loans receivable 300000
Cr Cash 300000
(Being loans drawdown)
1st payment Dr Cash 75,137
Cr loans receivable 51,137
Cr interest income 24,000
2nd payment Dr Cash 75,137
Cr loans receivable 55,228
Cr interest income 19,909
P&L
Islamic RM120K (8% on RM300K) simple ROR
Conventional RM75,685 (reducing balance)
Balance Sheet
Islamic RM420K recognition upfront
Conventional RM300K at PV
(total repayment RM420,000 Vs RM375,685)
Effective yield
Islamic = 12.38% (equivalent to IRR); or
Conventional simple interest = 15137/300K=5.05%
Murabaha contract
We use the 8% return as the discount rate to find the
annual repayment of $75,136
27
How do we calculate the repayment under the discounting
model?
1. PV = $300,000; i= 8%, n = 5 years.
2. Using the i in (1) above, find the 5- yearly repayment of the
PV of $300,000.
(
(
(
(
=
i
i
A PV
n
) 1 (
1
1
08 .
) 08 . 1 (
1
1
000 , 300
) 1 (
1
1
000 , 300
5
=
(
(
(
(
X
i
i
n
(1.08)^5 1.469328077
1/(1.08)^5 0.680583197
1-[1/(1.08)^5] 0.319416803
{1-[1/(1.08)^5]}/.08 3.992710037
A 75,137
3. Split interest and principal components
from monthly repayment of $75,137
Year 1 principal repayment = $75,136-
$24,000 = $51,136
Yr 1 interest = $300,000 * 8% = $24,000
Yr 2 interest = $300,000 - $51,136) * 8% = $19,909
And so on ..
Note: this is for comparative purpose only. It is for those who are interested.
It is not intended that this is part of the core learning for this module.