Document No.4

CALCULATING EQUATED MONTHLY INSTALLMENT (EMI)
 
In house finance, equated monthly installment (EMI) refers to the monthly payment towards interest and principal made by a borrower to a lender. EMI is calulated using a formula that considers loan amount, interest rate, and loan period as variables.
 
The formula for calculating EMI:
EMI = (L × I) × [(1 + I)^N  ÷ {(1 + I)^N } -1]
 
Where
L = loan amount
l = interest rate per annum divided by 12
^ = to the power of
N = loan period in months
 
Assuming a loan of Rs. 1 lakh at 9 % per annum, repayable in 15 years, the EMI calculation using the formula will be:
EMI = (1,00,000 × 0.0075) × [(1 + 0.0075) 180  ÷ {(1+0.0075) 180} - 1]
        = 750 × [3.838 ÷ 2.838]
        = 750 × 1.35236
        = 1,014
 

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