Shyam takes a loan of Rs. 5,00,000 with 8% annual interest rate for 10 years. The value of EMI under flat rate system is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 7500
In the flat rate system the interest is charged on the full principal for the whole period, as simple interest:
\( \displaystyle \text{interest} = \frac{5{,}00{,}000 \times 8 \times 10}{100} = 4{,}00{,}000 \)
\(\text{total amount} = 5{,}00{,}000 + 4{,}00{,}000 = 9{,}00{,}000\)
This is repaid in \(10 \times 12 = 120\) equal monthly instalments:
\( \displaystyle \text{EMI} = \frac{9{,}00{,}000}{120} = 7500 \)
CBSE Applied Mathematics (Class XII):
Methods of Calculation of EMI or Instalment
