# Calculating the principal

By which formula shall I calculate the amount for the following problem:

Let say I want to buy a product, for which, I need to pay monthly installment of Rs500 , for 3 Months and rate of interest is 12% per annum.

The amount which needs to be deposited in saving bank account is ?.

Here its 1470.

Similarly for 6000 to be received in 3 months the rate of interest is 5.9 Amount deposited = 17824.

500 - Per month

2 - time in month

0 - Rate of interest p.a --> Principal =1000

Not able to understand the formula to calculate the amount deposited

• @Chinny84 I am from programming background this question was asked here.And I am not able to understand the formula through which the output has been calculated hence asked here.However the answer is mention with the formula used in the post only , but I am not able to understand how it has been concluded to that point. – xyz Jul 25 '16 at 12:41
• @Chinny84 yes..The mathematical calculation is already done (implemented in code) , its just I don't understand how they have formulated it.qa.geeksforgeeks.org/1350/codevita-question?show=8509 (This is the same question I asked) – xyz Jul 25 '16 at 13:26

The formula is

$PV=a\cdot \left( \Large{ \frac{(1+\frac{i}{12})^m-1}{\frac{i}{12}}}\right) \cdot \Large{\frac{1}{(1+\frac{i}{12})^m}}$

PV:= Present Value

a:= Annuity

i:= Annual percentage rate

m:= Number of months

In your second example the calculation is

$PV=6000\cdot \left( \Large{ \frac{(1+\frac{0.059}{12})^3-1}{\frac{0.059}{12}}}\right) \cdot \Large{\frac{1}{(1+\frac{0.059}{12})^3}}\normalsize{\approx 17,824.44}$