In the last two Reflektor, we have seen that there are four important numbers that are associated with
any launch.
The first one is the principal amount.
This is the amount we get from bank at the start of our loan.
The second one is the rate this the rate of interest that we have to pay on the principal amount.
Then the next key parameter is term.
This is the time period in which we have to repay our loan.
And the fourth is the repayment amount, this is the amount we have to repay for our loan at the end
of each term, all these four key parameters are interlinked.
And if you have information about any of the three parameters, then you can find out the fourth parameter.
So in this first exercise, we will find out the repayment amount if we have principal amount.
Great.
And Tom.
In the second exercise, we will find the rate of interest if we have the principal amount.
The repayment amount and the number of dump's.
And in the last exercise, we will find the number of items or number of periods, if we have the principal
amount, the rate of interest and the repayment amount.
So now let's first start with finding out the repayment amount from these three parameters, principal
amount.
Great.
And.
The formula to find out the repayment amount is BMB, so we have to rate equal to BMT and in this formula,
first we have to mention the rate, the rate of interest, which is the cell.
Then we have to mention the number of times.
Which is this?
And then for the third parameter, we have to mention the principal amount, which is this, if we don't,
we will get this as our repayment amount.
So for three years, we have to pay around thirty nine thousand at the end of each year to repay our
loan.
Now, this repayment is concerned that I have copied the formula to the other two years as well.
Now, as we have discussed in our Turay lecture, part of this repaid amount is certainly toward interest
and the rest of the amount is deducted from our principal amount.
So to find out what is the distribution of this interest and principal repayment.
We can use our principal amount and rate of interest to find it for the interest amount and First-Tier,
we have to multiply what principal amount with the rate.
So the principal amount is around 200000 and it pays nine percent.
So the total interest paid and forced repayment term is nine thousand, so out of this thirty nine thousand
five hundred and five, we have repaid nine thousand as interest and rest of the amount as principal
repayment.
So to find out principal repayment in the first year, we will just subtract.
These two numbers.
So as you can see in the first period, we have paid interest of nine thousand and we have repaid the
principal amount by around thirty thousand five hundred dollars.
So the balance of our principal amount at the end of year one is.
We will subtract this principal amount we paid.
From the principal among.
Since we have mentioned repaid amount as as a negative number, we are adding these two numbers.
So at the end of year one, our principle balance is around sixty nine thousand for year two, we will
pay nine percent interest on this final principal amount.
So to find out and dress for second year, we will multiply this balance amount with the rate of interest.
So you can see for the year, too, we are being around six thousand two hundred and fifty dollars as
interest.
And the total amount we paid.
Was thirty nine thousand five hundred and five, so if we subtract this too, this is the amount we
are paying.
Towards Principal Lamont.
So you can see and hear when we paid only 30000 towards principal, and this year we are paying around
33000 towards principal.
So the balance amount after year two is, again, this 69, which was the previous year balance, and
then minus 33, which is the amount we paid towards principal.
We're here to enter, so you can see that at the end of two years, only 36000 is remaining out of 100000,
knowing that we will pay nine percent interest on the remaining amount.
So let's find out the interest we paid.
So in the third year, we are paying around three thousand two hundred interest, again, the total
amount we paid for this year is thirty nine thousand five hundred and five.
And the rest of the money is going towards the principal loan, so if we subtract this to.
So you can see that at the end of year two, this was thirty six thousand two hundred and forty three.
This was the principal amount remaining.
And in the third year, we are paying exactly that much amount so that we are blown free at the end
of three years.
So if you subtract, we will get zero here.
So we have repaid our loan in three years.
Where we paid a different amount towards interest and different amount towards principal and all the
three years, but the total repaid amount remains the same, which is thirty nine thousand five hundred
and five.
So you can use BMT to find out this overall amount that you have to pay and then you can just use your
mathematical formula to find out.
Interest and part of principle, if you want to deep dive into your loan repayment structure.
No, there is one more formula you can use to find this part of principal amount.
You don't have to first use BMT and then calculate the interest and then calculate the part of principal.
You can directly use another formula, which is BP empty.
So if you just write BP MP.
First, you have to give the rate.
For the second parameter, you have to give the period number or item number for which you want to calculate
the part of principle.
So, for example, let's select to.
Then as a parameter, we have to give a number of terms, number of terms is three.
Then we have to give the principal amount that we have taken.
If you calculate this will directly give you the amount you have paid towards the principal.
So as you can see, this is exactly matching the amount we were getting before.
So, again, you can use BMT to find total repayment amount and you can use BMB to find part of payment
that you are paying towards the principal amount.