Question 1

How is EMI calculated?

Accepted Answer

EMI is calculated using the formula EMI = P x R x (1+R)^N / ((1+R)^N - 1), where P is the loan principal, R is the monthly interest rate, and N is the number of monthly instalments.

Question 2

What is the difference between SIP and Lumpsum investing?

Accepted Answer

SIP (Systematic Investment Plan) involves investing a fixed amount every month, while Lumpsum investing means putting in the full amount at once. Both grow using compound returns, but their cash-flow timing differs.

Question 3

What does prepaying a loan do to my EMI?

Accepted Answer

Making extra monthly payments reduces the outstanding principal faster, which shortens the loan tenure and reduces the total interest paid over the life of the loan.

Question 4

Why does inflation-adjusted value matter for investments?

Accepted Answer

Inflation reduces purchasing power over time. Adjusting future value for inflation shows what your investment corpus will actually be worth in today's money.