Mohini purchases a house worth Rs. 50 lakhs and makes a down payment of Rs. 11.2 lakhs. She pays the remaining amount on monthly EMI using a reducing balance method. The bank charges 6% per annum compounded monthly for a tenure of 25 years. Her EMI is: [Given: \((1.005)^{-300} \approx 0.224\)]
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 25000
The loan is the price minus the down payment:
\(P = 50 - 11.2 = 38.8 \text{ lakhs} = 3880000\)
\( \displaystyle i = \frac{6\%}{12} = 0.005 \text{ per month} \)
\(n = 25 \times 12 = 300 \text{ months}\)
By the reducing balance method, the EMI is
\( \displaystyle EMI = \frac{P\,i}{1 - (1 + i)^{-n}} = \frac{3880000 \times 0.005}{1 - (1.005)^{-300}} \)
\( \displaystyle = \frac{19400}{1 - 0.224} = \frac{19400}{0.776} = 25000 \)
So her EMI is Rs. 25,000.