Question

Calculate EMI under Flat-Rate System for a loan of ₹ 5,00,000 with 7.5% annual interest rate for 5 years.

Hint:

Flat-rate EMI = $\dfrac{\text{Total repayment}}{\text{Number of months}}$. Interest is computed on original loan amount throughout.

Answer 1

In a flat-rate system, interest is calculated on the entire principal amount for the full duration.
Principal $P = ₹ 5,00,000$
Rate of interest $r = 7.5%$ per annum
Time $n = 5$ years
Total interest = $P \times r \times n / 100$
\[ = \frac{5,00,000 \times 7.5 \times 5}{100} = ₹ 1,87,500 \]
Total repayment = Principal + Interest = ₹ $5,00,000 + 1,87,500 = ₹ 6,87,500$
Total months = $5 \times 12 = 60$
EMI = $\dfrac{6,87,500}{60} = ₹ 12,708.33$