Mrs. Soma takes a loan of Rs. 5,00,000 with 10% annual interest rate for 5 years. What will be her EMI under flat rate system?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 12500
Under the flat rate system, interest is charged on the full principal for the whole period.
\( \displaystyle \text{Interest}=P\times r\times t \)
\( \displaystyle =500000\times 0.10\times 5 \)
\( \displaystyle =250000 \)
\( \displaystyle \text{Total amount}=500000+250000=750000 \)
\( \displaystyle \text{Number of instalments}=5\times 12=60 \)
\( \displaystyle \text{EMI}=\frac{750000}{60}=12500 \)
So the EMI is Rs. 12500.