I have recently taken a home loan at a floating interest rate of 11%. Though the bank has provided me the complete break-up of the loan, I am unable to understand it. Could you please explain the formula used for calculating EMIs?
— Anupam Varma, e-mail
The calculation of home loan is based on the fundamental principles of annuity. EMI is the amount paid every month which gives the present value of ordinary annuity or annuity due (given a particular rate of interest and loan tenure). Following is the formula used for the computation of EMIs:
EMI = PV(Home loan)/A
PV = R(1-(1+i)-n/i)
where A = 1-(1+i)-n/i
PV is the present value of annuity or amount of home loan i is the interest rate n is the tenure (in months)
I have been working in the airlines industry for nine years and have been bewildered by the changes in my salary structure every time I have changed my job. After reading your cover story (Choose your Salary Structure, 4 September), I understood why there has been an increase in my special allowances rather than in the basic salary.This will help me negotiate the pay package more firmly with my next employer.
— Neetu Chaturvedi, Mumbai
Money Today has always pointed out that career is your biggest investment. The story on salary structures endeavoured to explain how to get the most out of this asset. Special allowances are excluded from the calculation of the employer’s contribution to provident fund. This is one of the reasons why they make for a high portion of the salary. Write to us if you are successful in getting a better deal in your next job.
I have just started my career as a financial planner and insurance adviser. Your stories are very informative and helpful. The designers of your team must be especially congratulated for an impressive presentation of graphs, pictures, tables and charts that are easy to understand.
— Rajveer Panesar, Punjab
We are glad you like our stories. Personal finance is an important subject but many people are intimidated by the number crunching involved in it. Our design focuses on making calculations simple for readers.
All your articles emphasise the need for long-term investment. Then why do you consider only a three-year performance of mutual funds in the “Mutual Fund Monitor”?
— Sandeep Kumar, Amritsar
Three years is a suitable period to evaluate the consistency of a fund’s performance. Moreover, any data older than three years is not easily available for all funds.
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