Man can u please tell me why will the merchant get 3 months of interest on 1st installment ,when time period of loan given and 1st installment is only 1 month
@@saniddhyabhatnagar1798 In these questions we have to find the number which is fix( installment). Suppose if borrower take loan for 4 months, then borrower either can pay loan by paying interest at the end of 4 months with principle or borrower can payback loan in installment (which is fix every month). In both the scenario , merchant will get the same amount at the end of time period. Now suppose borrower pay first month installment then what merchant will do? He will deposit that installment in bank and earn interest for remaining 3 months on that first installment. Similarly interest of 2 months will be earned on next installment.
@@ankurrathi2314 isn't simple interest paid in installments less than that paid in the end? Also, depositing the money in the bank is not earning merchant interest paid by us, so why to include it in our interest calculations?
@@saniddhyabhatnagar1798 Further simplifying, each of the instalments "X" already has its interest embedded with it for the period which it has been used by the borrower. That means the 1st "X" has 1st year's interest, the 2nd "X" has 2 years interest in it and so on. This is actually the logic behind installments. To derive a formula we've calculated the interest for rest of the period for each of the instalments, that is 3 years for the 1sr installment, 2 years for the 2nd and so on and that gives us the total amount with simple interest, isn't it? I suppose this is the reason of your confusion. Installments are not the same as simple interest, it's always lesser. We've just added the extra interests to make it equal to total amount with simple interest and derive a working formula.
You are a true teacher. I have not seen anyone discussing basic concepts like you do.🎉🎉🎉
Have been looking for this derivation from days finally found it, tysm 😆😆😆😆
Love you sir 🎉🎉 best explanation ever😊😊
crystal clear acharya but you
should have included questions for more understanding
great video
Thank u thank u sir , finally understood this concept
Man can u please tell me why will the merchant get 3 months of interest on 1st installment ,when time period of loan given and 1st installment is only 1 month
@@saniddhyabhatnagar1798 In these questions we have to find the number which is fix( installment). Suppose if borrower take loan for 4 months, then borrower either can pay loan by paying interest at the end of 4 months with principle or borrower can payback loan in installment (which is fix every month). In both the scenario , merchant will get the same amount at the end of time period. Now suppose borrower pay first month installment then what merchant will do? He will deposit that installment in bank and earn interest for remaining 3 months on that first installment. Similarly interest of 2 months will be earned on next installment.
@@ankurrathi2314 thank you for the reply,it was very helpful.i got it now
@@ankurrathi2314 isn't simple interest paid in installments less than that paid in the end? Also, depositing the money in the bank is not earning merchant interest paid by us, so why to include it in our interest calculations?
@@saniddhyabhatnagar1798 Further simplifying, each of the instalments "X" already has its interest embedded with it for the period which it has been used by the borrower. That means the 1st "X" has 1st year's interest, the 2nd "X" has 2 years interest in it and so on. This is actually the logic behind installments. To derive a formula we've calculated the interest for rest of the period for each of the instalments, that is 3 years for the 1sr installment, 2 years for the 2nd and so on and that gives us the total amount with simple interest, isn't it? I suppose this is the reason of your confusion. Installments are not the same as simple interest, it's always lesser. We've just added the extra interests to make it equal to total amount with simple interest and derive a working formula.
Very useful sir...
Indeed ❤
Good explanation.
Thanks sir
Mind blowing
Thanku sir