Bank Theory

Home Loans & Financial Calculations - Bank Theory Additional Reading Material on Home Loans & Financial Tools Author: Suman Biswas (Bank Theory) 1. Mortgage Advice Mortgage advice helps borrowers choose the right home loan product based on income, credit score, and future financial goals. Advisors assess repayment capacity, suggest fixed or floating interest rates, and analyze risk appetite. 2. Home Information Packs (HIPs) HIPs include vital documents like Energy Performance Certificates, property title documents, and local authority searches. They ensure transparency for buyers in property deals. 3. Time Value of Money (TVM) TVM is a key concept in finance, indicating that a sum of money today is worth more than the same sum in the future due to earning capacity. This is the basis for discounting and compounding calculations. Formulas: Future Value (FV) = PV × (1 + r) n Present Value (PV) = FV / (1 + r) n 4. ...

Financial Mathematics – Interest & Annuities | Bank Theory > Financial Mathematics – Calculation of Interest & Annuities What is Simple Interest? Simple Interest is calculated only on the original principal amount over the period of investment or loan. The formula is: SI = (P × R × T) / 100 Where: P = Principal R = Rate of Interest per annum T = Time in years Example: If ₹10,000 is invested at 5% per annum for 3 years, then SI = (10000×5×3)/100 = ₹1,500. What is Compound Interest? Compound Interest is calculated on the principal plus accumulated interest. The formula is: CI = P × (1 + R/100) T – P Example: For ₹10,000 at 5% p.a. compounded annually for 3 years: CI = 10000 × (1.05) 3 – 10000 = ₹1,576.25 Fixed and Floating Interest Rates Fixed Rate: Remains constant over the loan/investment term. Floating Rate: Varies based on marke...