Vishnu purchased a house from a company for Rs. 7,00,000 and made a down payment of Rs. 1,50,000. He repays the balance in 25 years by monthly instalments at 9% compounded monthly. What are the monthly payments?
[Given that \((1.0075)^{-300}=0.1062878338\)]
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 4,615.58
The loan is the balance after the down payment:
\(P = 700000 - 150000 = 550000\)
Rate per month and number of payments:
\( \displaystyle i = \frac{0.09}{12} = 0.0075,\quad n = 25\times 12 = 300 \)
The EMI by the reducing balance method is
\( \displaystyle E = \frac{P\,i}{1 - (1+i)^{-n}} \)
\( \displaystyle = \frac{550000\times 0.0075}{1 - 0.1062878338} \)
\( \displaystyle = \frac{4125}{0.8937121662} \)
\( = 4615.58 \)
So the monthly payment is Rs. 4,615.58.