HPSM calculation learning

  

Question :

Suppose an HPSM investment of tk 5 lac was allowed to a client for 5 years excluding gestation period 1 year at 15% RR PA. What will be the monthly installment?

Solution:   Principal 5 lac

                   RR PA 15%

                 Gestation period 12 months

                  Investment for 5 years

MR/P=Monthly rent or profit

RG= Gestation rent

Monthly Principal (MP)= 500000÷60=8,333

Gestation Rent (GR) as unearned rent for Gestation Period will be distributed over 5 years equally as reducing balance method : 500000×15%=75000, one year pr 12months rent, will be divided equally over 5 years, so ,

Gestation Rent/ Profit per month :75000÷60=1250 tk

MR/P=Monthly rent or profit

(500000×15%)+(8333 as last month principal ×0.15 or 15%)12 for calculation of one month ÷2 as reducing balance , divided by 2 means he has actually used about 2.5 lac for whole 5 years, not 5 lac

So, (500000×15% )+(8333  ×0.15 or 15%)12 ÷2  (or you can divide with 24 directly)=3177

Now Monthly installment,

Monthly Principal (MP)+Ges Rent+Monthly Profit or Rent

                             = 8333+1250 +3177

                           =12760 as monthly installment Ans,

for more learning, 

2^nd monthly installment calculation=MP+GR+2^nd month rent

8358+1250+3125, =12760 (the amount reducing rent equals the amount of increased principal) (Brac bank example, at beginning principal reduces at low rate of 6 lac, later principal reduces more, so outstanding shows in internet banking as talked for understanding with Ashraf/anis of brac bank)

Rent reduced from 2^nd month, so, in outstanding of laan, Principal will be reduced more