Mr. Ram took a loan of ₹4,00,000 at 10% annual interest rate and paid ₹20,000 as monthly installment under flat rate system. What is the term of the loan ?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 2 years
The formula for calculating the total interest is,
Interest = Principal × Rate × Time
Total amount paid = $20,000 × 12t = 2,40,000t$
⇒ 2,40,000 t = Principal + Interest
$=4,00,000+40,000t$
$t=\frac{4,00,000}{2,00,000}=2\,Years$