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 interest system, interest is computed on the full principal for the entire loan term.
Principal Amount (P) = ₹ 5,00,000
Annual Interest Rate (r) = 7.5%
Loan Term (n) = 5 years
Formula for Total Interest = $P \times r \times n / 100$
\[= \frac{5,00,000 \times 7.5 \times 5}{100} = ₹ 1,87,500\]
Total Amount to Repay = Principal + Total Interest = ₹ 5,00,000 + ₹ 1,87,500 = ₹ 6,87,500
Total Loan Duration in Months = 5 years × 12 months/year = 60 months
Equated Monthly Installment (EMI) = Total Repayment Amount / Total Months = ₹ 6,87,500 / 60 = ₹ 12,708.33