EMI CALCULATION – I literally went idiot!
Sometimes small little calculation makes you mad. This happened to me while calculating EMI. I know I am not that good with Math hence always try to avoid it first. Then I remembered I suddenly remembered PMT function in Excel which we once learned during our MBA. However to my surprise it didn’t solve my problem. The figure showed complete mismatch with the actual calculation made by Bank. I know I have good patients and always believe in permutation and combination. But to my bad luck, success for me was far away. This was really hurting and frustrating to me. One small simple calculation and I could not solve.
With the time flying on I had no other option but to ask some of our so called math scholar in my friend. His idea was simple. He began with calculation of Simple Interest by Multiplying Loan Amount multiplied by Number of Months multiplied by Rate of Interest. Then he began to calculate Total amount by Adding Loan Amount and Simple Interest amount and finally dividing the thing by number of months. Hence his formula was as follows:
(Loan Amount + Simple Interest) / Number of Months.
I being not so very good at Math, found the above formula interesting and result oriented. I gave him a big hand shake and a pat on his back. However to my dismay when I run the formula in Excel, the answer can once again incorrect. I firstly though that I might have keyed in the wrong formula, but that was not the case and the formula itself was idiotic. All my happiness went away and once gain I started scratching my mind.
Now it was a high time and I have to solve it and I turned up to Internet. I just typed EMI calculation formula. Most of the results were not good and non operative. But to my luck I found one. Entered the formula in Excel and ran the result. This time it worked and I took a breath of relief.
Really sometime small and easy calculation make us crazy………………………………..
For your reference below mentioned is the same formula
LOAN AMT = P
r = rate of interest per annum in %
i = r/(100*12) --> To make it monthly
N = Number of years for loan
EMI = P * ( i / ( 1 - (1+i)^(-12*N)))
However this made good thing for me and I created Loan amortization schedule in excel which you can check on the following mentioned link on Finance 3.0.
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