{"id":7145,"date":"2022-03-21T14:54:23","date_gmt":"2022-03-21T09:24:23","guid":{"rendered":"https:\/\/www.goseeko.com\/blog\/?p=7145"},"modified":"2022-03-21T14:54:27","modified_gmt":"2022-03-21T09:24:27","slug":"what-is-equated-monthly-instalment","status":"publish","type":"post","link":"https:\/\/www.goseeko.com\/blog\/what-is-equated-monthly-instalment\/","title":{"rendered":"What is equated monthly instalment?"},"content":{"rendered":"\n

Overview<\/h2>\n\n\n\n

An equated monthly instalment(EMI)<\/a> is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. <\/p>\n\n\n\n

Equated monthly installments are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full.<\/p>\n\n\n\n

Note about equated monthly instalment <\/h2>\n\n\n\n

1.<\/strong>   An equated monthly instalment (EMI) is a fixed payment made by a borrower to a lender on a specified date of each month.<\/p>\n\n\n\n

2.<\/strong>   EMIs allow borrowers the peace of mind of knowing exactly how much money they will need to pay each month toward their loan.<\/p>\n\n\n\n

3.<\/strong> \u00a0 We can calculate EMI in two ways: the flat-rate method or the reducing-balance method.<\/p>\n\n\n\n

We can calculate EMI flat-rate formula by adding together the principal loan amount and the interest on the principal and dividing the result by the number of periods multiply by the number of months.<\/p>\n\n\n\n

The EMI reducing-balance method is calculated using the formula shown below, in which P is the principal amount borrowed, I is the annual interest rate, r is the periodic monthly interest rate, n is the total number of monthly payments, and t is the number of months in a year.<\/p>\n\n\n\n

Solved examples<\/h2>\n\n\n\n

Example: A man buys a machine for Rs.20,00. What its value be after 6 years, if it is assumed to depreciate at a fixed rate of 12% per annum.<\/strong><\/p>\n\n\n\n

Sol.<\/p>\n\n\n\n

Here we have P = 20,000, n = 6 and r = -0.12 (rate of interest is negative in depreciation)<\/p>\n\n\n\n

Then,<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

So that the value of the machine in 6 years will be = 9288.08<\/p>\n\n\n\n

Example: A machine valued at 500,000 depreciates at 6% per annum then in how many year its value will reduce to 100,000?<\/strong><\/p>\n\n\n\n

Sol. Here P = 500,000,  r = 0.06,  n = ? and the final value is  = 100,000<\/p>\n\n\n\n

We know that-<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Taking log on both sides-<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

So that<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Therefore approximately it will take 26 years for the value decline to 100,000<\/p>\n\n\n\n

Example: Ayesha invests Rs. 3000 initially and then Rs. 1800 at the end of the first, second and third years and finally Rs. 600 at the end of 4<\/strong>th<\/sup><\/strong> year.<\/strong><\/p>\n\n\n\n

If Ayesha pays the interest annually at the rate of 6.5% then find the value of the investment at the end of 5th<\/sup> year.<\/strong><\/p>\n\n\n\n

Sol.<\/p>\n\n\n\n

Ayesha invests Rs. 3000 for 5 years and grows to-<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The three sums of Rs. 1800 invests for 4, 3 and 2 years and grow in total-<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

And Rs. 600 invests for 1 year and grows to-<\/p>\n\n\n\n

Then the total value at the end of 5 years will be 11,280.81<\/p>\n\n\n\n

Interested in learning about similar topics? Here are a few hand-picked blogs for you!<\/p>\n\n\n\n