Sanjay takes a personal loan of Rs. 6,00,000 at the rate of 12% per annum for ‘n’ years, the EMI using flat rate method is Rs. 16,000. The value of n is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 5
In the flat rate method, simple interest is charged on the full loan for the whole period:
\( \displaystyle \text{Interest} = 6{,}00{,}000\times\frac{12}{100}\times n = 72{,}000n \)
The loan and the interest are repaid in 12n equal monthly instalments:
\( \displaystyle \text{EMI} = \frac{6{,}00{,}000 + 72{,}000n}{12n} = 16{,}000 \)
\(6{,}00{,}000 + 72{,}000n = 1{,}92{,}000n\)
\(1{,}20{,}000n = 6{,}00{,}000\)
\(n = 5\)