Calculates EMI using...\[P\times r\times\left[\frac{(1+r)^n}{(1+r)^n-1}\right]\]
EMI stands for Equated Monthly Installment. It is a fixed amount of money that a borrower needs to repay to a lender on a monthly basis for a loan or mortgage. EMI includes both the principal amount and the interest, which are divided equally over the loan's tenure.
Calculating EMI is important because it helps borrowers understand the financial commitment they are undertaking. By calculating the EMI, borrowers can determine if they can afford the monthly payments and plan their finances accordingly. It also helps borrowers compare different loan options from various lenders to choose the one that best suits their financial situation.
EMI Formula
Where:
P = Principal amount (loan amount)
r = Monthly interest rate (annual interest rate / 12)
n = Number of monthly installments (loan tenure in months)
To calculate the EMI for a loan amount of $1250 at an interest rate of 5% for 5 years, use follow these steps:
Enter "1250" into the box marked "amount"
Enter "5" into the box marked "rate (%)"
Enter "5" into the box marked "time(year), pounds"
Hit the checkmark to calculate your EMI
1. Determine the loan amount: This is the total amount of money borrowed from a lender.
2. Determine the interest rate: This is the annual interest rate charged by the lender on the loan amount.
3. Determine the loan tenure: This is the total duration in months for which the loan is taken.
4. Calculate the monthly interest rate: Divide the annual interest rate by 12 to get the monthly interest rate.
5. Calculate the EMI: Use the formula EMI = (P * r * (1 + r)^n) / ((1 + r)^n - 1), where P is the loan amount, r is the monthly interest rate, and n is the loan tenure in months.
6. Check the result: Double-check the calculation and make sure all units are consistent. In this case, the EMI is in the currency unit of the loan amount.
7. Validate the result: You can validate the result by substituting the EMI back into the original problem or using alternative methods to verify its accuracy. For example, you can check if the EMI aligns with the loan terms and conditions provided by the lender.
To calculate the EMI, we will use the formula:
EMI = P r (1 + r)^n / ((1 + r)^n - 1)
Where:
P = Principal amount (loan amount)
r = Monthly interest rate (annual interest rate / 12)
n = Number of monthly installments (loan tenure in months)
First, let's convert the annual interest rate to a monthly interest rate:
r = 5% / 12 = 0.05 / 12 = 0.00417
Next, let's convert the loan tenure from years to months:
n = 5 years * 12 months/year = 60 months
Now, we can substitute the values into the formula:
EMI = 1250 0.00417 (1 + 0.00417)^60 / ((1 + 0.00417)^60 - 1)
The final answer for the EMI calculation is
