Vibhuti bought a car worth Rs. 10,25,000 and made a down payment of Rs. 4,00,000. The balance is to be paid in 3 years by equal monthly instalments at an interest rate of 12% p.a. The EMI that Vibhuti has to pay for the car is:
{Use \((1.01)^{-36}=0.7\)}
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 20,833.33
The loan is the balance after the down payment:
\(P = 10{,}25{,}000 - 4{,}00{,}000 = 6{,}25{,}000\)
The monthly rate and the number of instalments are
\( \displaystyle i = \frac{12}{12\times 100} = 0.01,\quad n = 3\times 12 = 36 \)
By the reducing-balance EMI formula:
\( \displaystyle \text{EMI} = \frac{P\,i}{1 - (1+i)^{-n}} \)
\( \displaystyle = \frac{6{,}25{,}000\times 0.01}{1 - (1.01)^{-36}} \)
\( \displaystyle = \frac{6250}{1 - 0.7} = \frac{6250}{0.3} \)
\(= 20{,}833.33\)
So the EMI is Rs. 20,833.33.