Mr. A took a loan of ₹300000 at 10% annual interest rate and paid ₹ 5000 as monthly installment under flat rate system. What is the term of the loan ?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 10 years
Monthly installment = $\frac{P+(P×r×t)}{n}$
P = Principal amount
r = Annual interest rate
t = term of loan in years
n = total number of payments
$∴5000=\frac{300000+(3000×0.10×t)}{12×t}$
$⇒5000×12t=300000+30000t$
$⇒30000t=300000$
⇒ t = 10 years