In: Finance
we can calculate the EMI ( equall monthly installment) using the following formula =
where
E is EMI
P is Principal Loan Amount
r is rate of interest calculated on monthly basis.
n is duration in number of months
EMI for 1st case is calculated as follows :-
= 6000 * (0.24/12) * (1 + 0.24/12)30 / (1+(0.24/12))30-1
= 6000 * (0.02) * (1 + 0.02)30 / (1 + 0.02)30-1
= 120* 1.81136 / 0.81136
EMI =267.89
repayment schedule as follows
the proportion of interest to the loan is = (2037.09 / 6000)100 =33.95%
EMI for 2nd case is calculated as follows :-
= 12,000* (0.08/12) * (1 + (0.08/12))50/ (1+(0.08/12))50-1
= 12,000* (0.0066) * (1 + 0.0066)50/ (1 + 0.0066)50-1
= 79.20 * 1.3894/ 0.3894
EMI =282.589
repayment schedule as follows
when we compare the EMI , itis lower for 1st case.
the proportion of interest to the loan is = (2154.46 / 12000)*100 = 17.95%
when we compare the interset proportion , itis lower for 2nd case. (17.95%), so it is cheapest.