Mr. X wishes to purchase a flat for Rs. 44,60,800 with a down payment of Rs 10,00,000 and balance in equal monthly installments (EMI) for 20 years. If bank charges 7.5% per annum compounded monthly, then the EMI is:
[Given that $(1.00625)^{240} = 4.4608$]
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 27880
Given:
Cost of flat: ₹44,60,800
Down payment: ₹10,00,000 → Loan amount: ₹44,60,800 − 10,00,000 = ₹34,60,800
Annual interest rate: 7.5% compounded monthly → monthly rate $i = 0.075/12 = 0.00625$
Tenure: 20 years → $n = 20 \cdot 12 = 240$ months
EMI formula: $EMI = \frac{P \cdot i \cdot (1 + i)^n}{(1 + i)^n - 1}$
Substitute values:
$EMI = \frac{34,60,800 \cdot 0.00625 \cdot (1.00625)^{240}}{(1.00625)^{240} - 1}$
Given: $(1.00625)^{240} = 4.4608$
$EMI = \frac{34,60,800 \cdot 0.00625 \cdot 4.4608}{4.4608 - 1} = \frac{96,499.2}{3.4608} \approx 27,873.45$