Rama takes a personal loan for a car worth Rs. 5,00,000 at an interest rate of 7% per annum to be repaid by equal monthly instalments (EMI) in 5 years. Using flat rate method, EMI will be:-
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 11,250
In the flat rate method the interest is charged on the whole loan (here the car’s price, Rs. 5,00,000) for the whole period:
\( \displaystyle \text{Interest}=P\times r\times n=5{,}00{,}000\times 0.07\times 5=1{,}75{,}000 \)
\( \displaystyle \text{Total amount}=5{,}00{,}000+1{,}75{,}000=6{,}75{,}000 \)
\( \displaystyle \text{EMI}=\frac{6{,}75{,}000}{5\times 12} \)
\( \displaystyle =\frac{6{,}75{,}000}{60} \)
\( \displaystyle =11{,}250 \)
CBSE Applied Mathematics (Class XII):
Methods of Calculation of EMI or Instalment
