Read the two statements and choose the correct option.
I. With reducing-balance EMIs, the interest part of each instalment falls and the principal part rises as the loan is repaid.
II. With reducing-balance EMIs, every instalment repays the same amount of principal.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

I: interest is charged only on what is still owed, which shrinks, so the interest part shrinks and the fixed EMI leaves more for the principal. True.
II: the EMI is fixed but its split changes, so the principal repaid grows each month. False.

Ten questions from EMI, CAGR & Depreciation, at your own pace.

Read the two statements and choose the correct option.I. With reducing-balance EMIs, the interest part of each instalment falls and the principal part rises as the loan is repaid.II. With reducing-balance EMIs, every instalment repays the same amount of principal.