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
The loan is the price minus the down payment:
\(P = 4460800 - 1000000 = 3460800\)
The monthly rate and the number of instalments:
\( \displaystyle i = \frac{7.5}{12 \times 100} = 0.00625 \)
\(n = 20 \times 12 = 240\)
By the EMI formula (reducing balance method),
\( \displaystyle \text{EMI} = \frac{P\,i\,(1+i)^n}{(1+i)^n - 1} \)
\( \displaystyle = \frac{3460800 \times 0.00625 \times 4.4608}{4.4608 - 1} \)
\( \displaystyle = \frac{3460800}{3.4608} \times 0.00625 \times 4.4608 \)
\(= 1000000 \times 0.00625 \times 4.4608\)
\(= 6250 \times 4.4608\)
\(= 27880\)
So the EMI is Rs. 27880.