Meesha takes a loan of Rs. 3,00,000 at an interest of 8% annually for a period of n years. If her monthly EMI using flat rate method is Rs. 7,000, then the number of installments:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 60
In the flat rate method interest is charged on the full principal for the whole period:
\( \displaystyle \text{Interest}=P\times r\times n \)
\( \displaystyle =300000\times 0.08\times n=24000n \)
The total amount is repaid in 12n equal monthly instalments:
\( \displaystyle \text{EMI}=\frac{P+\text{Interest}}{12n} \)
\( \displaystyle =\frac{300000+24000n}{12n} \)
\( \displaystyle =7000 \)
\( \displaystyle 300000+24000n=84000n \)
\( \displaystyle 60000n=300000\ \Rightarrow\ n=5 \)
Number of instalments = 12 × 5 = 60.
Shortcut: Check Option (2): 60 instalments = 5 years. Interest = 3,00,000 × 0.08 × 5 = 1,20,000; total 4,20,000; 4,20,000 ÷ 60 = 7,000.