Money Maths Made Simple: Checkpoint 1

Quick checkpoint - five questions on EMIs, flat rates, APR, CAGR and XIRR.

Question 1 of 5 Why are early EMIs on a home loan mostly interest?

Banks charge extra fees at the start Interest is charged on the outstanding balance, which is highest at the start The principal is repaid first EMIs change every month

As the balance falls, more of each EMI goes toward principal.

Question 2 of 5 A loan at 12 percent flat over two years is roughly equal to what reducing balance rate?

6 percent 12 percent About 21 to 22 percent 50 percent

Flat rates charge interest on the original amount throughout, nearly doubling the true cost.

Question 3 of 5 What does the APR include that the headline interest rate may not?

Only the interest Interest plus most fees and charges Future inflation Your salary

The APR combines interest and fees to show the true yearly cost.

Question 4 of 5 An investment rises 50 percent and then falls 50 percent. What happened to 100 rupees?

It is back to 100 rupees It is 75 rupees It is 125 rupees It is 50 rupees

100 becomes 150, then falls by half to 75 - the simple average of 0 percent hides the loss.

Question 5 of 5 Why is XIRR used for SIP returns?

It ignores timing It accounts for investments made on different dates It only works for fixed deposits It measures inflation

XIRR annualises returns on money invested at different times.

← Back to Lump Sum or Monthly Payments? Present Value in Practice Next lesson → Break-Even Analysis

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