Vatsala buys a car for Rs.7,00,000 and pays upfront Rs.2,50,000 through her credit card. The balance is to be paid in 5 years by equal monthly installments at an interest of 7% per annum as reducing balance. The EMI to be paid by Vatsala will be:- [given $(1.0058)^{-60}=0.7068$]
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 8901.7
$\text{Loan principal }P=700000-250000=450000$
$r=\frac{7}{100\times 12}=\frac{7}{1200}$
$n=5\times 12=60$
$\text{EMI}=\frac{P \cdot r}{1-(1+r)^{-n}}=\frac{450000 \cdot \frac{7}{1200}}{1-(1+\frac{7}{1200})^{-60}}$
$\text{EMI}\approx 8910.54\text{ Rs.}$