Which of the following are the methods to calculate the equated monthly installment (EMI) ?
(A). Reducing balance method.
(B). Increasing balance method.
(C). Sequential rate method
(D). Flat rate method
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) and (D) only
An EMI is calculated by one of two methods. In the reducing balance method the interest is charged on the balance still outstanding; in the flat rate method it is charged on the original loan for the whole period.
So the methods of calculating an EMI are the reducing balance method and the flat rate method.
Checking the statements
(A) Reducing balance method. — Correct. Interest is charged on the outstanding balance.
(B) Increasing balance method. — Incorrect. There is no such method of calculating an EMI.
(C) Sequential rate method — Incorrect. There is no such method of calculating an EMI.
(D) Flat rate method — Correct. Interest is charged on the original loan for the whole period.
CBSE Applied Mathematics (Class XII):
Methods of Calculation of EMI or Instalment
