Example A trader obtains an asset under a lease agreement from an Islamic bank. The asset has a fair value at the start of the contract of PKR 52,050 and is estimated to have an useful economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the trader does not have the option to cancel the contract early. The trader will pay three equal yearly installments and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 5100 and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 12%. Required: Calculate yearly payments and Islamic Bank’s profit
Example A trader obtains an asset under a lease agreement from an Islamic bank. The asset has a fair value at the start of the contract of PKR 52,050 and is estimated to have an useful economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the trader does not have the option to cancel the contract early. The trader will pay three equal yearly installments and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 5100 and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 12%. Required: Calculate yearly payments and Islamic Bank’s profit
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Example
A trader obtains an asset under a lease agreement from an Islamic bank. The asset has
a fair value at the start of the contract of PKR 52,050 and is estimated to have an useful
economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the
trader does not have the option to cancel the contract early. The trader will pay three equal yearly installments and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 5100 and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 12%.
Required: Calculate yearly payments and Islamic Bank’s profit
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