The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Create an original single-period amortisation question before attempting a full instalment formula. In authentic-paper review, identify the given rate period and whether the problem specifies level payment or equal principal. Give a proposed schedule that subtracts the entire instalment from principal and ask the learner to correct it. The solution should calculate interest first and reconcile the closing balance. This tests the mechanics directly without requiring a long numerical exercise or an unstated real-loan convention.
02 / UNDERSTANDING
The concept in context
A level payment does not mean that equal principal is repaid in every period. Early payments can contain more interest because the outstanding balance is larger. Actual schedules depend on the contract, payment dates and other applicable terms, so classroom examples should state their simplified assumptions clearly.
03 / UNDERSTANDING
A worked learning case
A teaching loan begins a period with ₹10,000 outstanding, an assumed monthly rate of one per cent and a ₹1,000 payment. Interest is ₹100 and principal reduction is ₹900, leaving ₹9,100 before the next period. The example excludes fees, missed payments and day-count complications to isolate amortisation mechanics.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
In the stated example, how much of the ₹1,000 payment reduces principal?
Show the answer and reasoning
₹900.
Period interest is one per cent of the ₹10,000 opening balance, or ₹100. Subtracting that interest from the ₹1,000 payment leaves ₹900 to reduce principal. The closing balance is therefore ₹9,100 under the simplified assumptions, rather than ₹9,000 or an unchanged ₹10,000 balance.
Two traps to watch for.
- Treating the entire instalment as principal repayment.
- Assuming equal instalments always contain equal amounts of interest.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Calculate interest from the stated opening principal balance.
Split the payment into interest and principal portions.
Carry the closing balance into the next assumed period.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/jaiib-junior-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/21%20-%20JAIIB-Final_Exam_24.07.25_Final_23.02.2026.pdf
- www.rbi.org.in https://www.rbi.org.in/commonperson/English/Scripts/PressReleases.aspx?Id=2123
For JAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
