Which of the following formula can be used to calculate the interest amount in EMI*PMTIPMTPPMTInterest

The formula used to calculate the interest amount in an Equated Monthly Installment (EMI) for a loan is derived from the basic formula for EMI calculation. The total interest can be calculated using the following relationship:

Formula for EMI

The formula for EMI is given by:

$EMI = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}$

Where:

• $EMI$ = Equated Monthly Installment
• $P$ = Principal amount (the total loan amount)
• $r$ = Monthly interest rate (annual rate divided by 12 and expressed as a decimal)
• $n$ = Number of monthly payments (loan tenure in months)

Total Payment Calculation

To find the total payment made over the loan term:

$\text{Total Payment} = EMI \times n$

Interest Amount Calculation

The interest amount can then be found by subtracting the principal from the total payment:

$\text{Interest Amount} = \text{Total Payment} - P$

Summary

• Use the first formula to compute the EMI.
• Multiply the EMI by the number of payments to find the total payment.
• Subtract the principal from the total payment to get the interest amount.

This provides a clear method to calculate the interest in an EMI framework.