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Describe this functionality and why an organization would use it (i.e. the business requirements).

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Flat Interest Calculation

The flat interest method calculates interest on the loan amount (principal) for the term of the loan account. The interest and principal components of all repayments is the same for the life of the loan account.

The calculations are: 

Interest = P * r/100 * n
Interest Installment = Interest / # of Repayments
Principal Installment = P / # of Repayments 
Payments = Interest Installment + Principal Installment 

Where,

P = loan amount (principal)
r = rate of interest per period (e.g., per year, per month)
n = term of the loan

Example 

A client borrows $1000 (P) with a interest rate of 2%(r) per month for four(n) months with four monthly payments.

Interest: $1000 * 2/100 * 4 = $80
Interest installment: $80 / 4 = $20
Principal installment: $1000 / 4 = $250
Monthly installment (principal and interest): $20 + $250 = $270 

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