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GST 5103 STRATEGIC MANAGEMENT PROF DR SAZALI ABDUL WAHAB

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PART A
DEFINITION OF INTERESTS;
Interest definition means that the cost of borrowing money or fee paid on
borrowed asets. Interest is the price that you need to pay because you are
borrowed money or, money earned by deposited funds.An interest rate is the
cost stated as a percent of the amount borrowed per period of time, usually one
year and one month. The aim of interest is to bear the risk of currency collapse in
the future. Beside that, it is to bear loss towards lender because postponing loan.
The lender or bank will increase the interest because the possibility the the value
of money might be in increase during the term of the loan. If they not increase the
interest the lender will loss.
For example :
When you take a loan out from a bank, or wherever, they will expect you to pay
interest. This means that you pay back what you took out on a loan, plus extra
money. So for example, if you took a loan out for RM500, and let's say you have
to pay it back with 15% interest, you would pay back RM575.
The ability to calculate interest is a vital part of understanding how well
you are managing your finances. Not only is interest likely a major player in
whatever debt you may owe, but it can also be a key factor in making your
money grow.

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HOW TO CALCULATE INTEREST ON A LOAN
1. Take a RM10,000 loan from your banking institution for 1 year and assume you
have to pay RM100 interest for one year, with a stated interest rate of 5%.
2. Calculate the effective loan rate = Interest divided by Principal or
RM100/RM10,000 = 5%.Your APR annual percentage rate is equal to the
previous stated rate.
3. Currently personal lines of credit loans and home mortgage loans will range from
the low 5% to the high 12-15% interest. Typically lines of credit will require a co-
signer and home loans often need at least 10-20% down to make the deal work.
4. Right now is a tough time to get a loan at a bank but if you have collateral such
as other properties to leverage or a car that is newer than 10 years you can use
them to borrow more money. Life insurance, stocks, bonds, and other
investments are also subject to be used as collateral.

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