Question

Shyam takes a loan of ₹5,00,000 with 8% annual interest rate for 10 years. The value of EMI under flat rate system is :

• A. ₹4166.67
• B. ₹7500
• C. ₹8332
• D. ₹50000

Answer 1

The Correct Option is B

To calculate the EMI under the flat rate system, we first need to determine the total interest and then find the total amount payable over the loan period.

1. Calculate Total Interest:
   Total Interest = Principal × Rate × Time
   Here, Principal = ₹5,00,000, Rate = 8% (or 0.08), and Time = 10 years.
   Total Interest = ₹5,00,000 × 0.08 × 10 = ₹4,00,000
2. Calculate Total Payment:
   Total Payment = Principal + Total Interest
   Total Payment = ₹5,00,000 + ₹4,00,000 = ₹9,00,000
3. Calculate EMI:
   EMI (Equated Monthly Installment) = Total Payment / Number of Months
   Since the loan is for 10 years, the number of months = 10 × 12 = 120 months.
   EMI = ₹9,00,000 / 120 = ₹7,500

Hence, the value of EMI under the flat rate system is ₹7,500.