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EMI, CAGR & Depreciation · Question 13 of 66

What is Mira's monthly instalment on the bank's reducing-balance loan, to the nearest rupee?

Question 13

MediumOriginal question

Mira wants a ₹5,00,000 car loan for 3 years, repaid in 36 equal monthly instalments. A dealer offers 8% a year at a flat rate; a bank offers 12% a year on the reducing balance, that is 1% a month. (Take (1.01)36=1.4308(1.01)^{36} = 1.4308.)

What is Mira's monthly instalment on the bank's reducing-balance loan, to the nearest rupee?

Options for question 13

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. EMI=P⋅i(1+i)n(1+i)n−1=5,00,000×0.01×1.43080.4308EMI = \frac{P \cdot i (1 + i)^{n}}{(1 + i)^{n} - 1} = \frac{5{,}00{,}000 \times 0.01 \times 1.4308}{0.4308}.

  2. 7,1540.4308≈16,606\frac{7{,}154}{0.4308} \approx 16{,}606 rupees.

Worth noting

₹18,889 charges 12% flat, on the full sum for all 3 years.

Concept
The reducing-balance EMI
Typical time
120 s
Your time
—
The rule this testsEMI by the flat-rate method
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