Question

Shyam borrows Rs.80,000 for a musical system at a monthly interest of 1.25 per cent. The loan is to be repaid in 12 equal monthly installments, payable at the end of each month. Prepare the loan amortization schedule (EMI).

(a) Rs. 9,563
(b) Rs. 8,743
(c) Rs. 7,925
(d) Rs. 7,112

Answer 1

To find the Equated Monthly Installment (EMI), the formula is applied with the given values: principal amount Rs.80,000, monthly interest rate 1.25% (converted to decimal), and 12 monthly installments. The calculated EMI is approximately Rs. 7,925. Thus the correct option is option (c).

Step-by-step explanation:

To calculate the Equated Monthly Installment (EMI), we can use the formula:

EMI = [P x r x (1 + r
`)^n`] / [(1 + r
`)^n` - 1]

Where:

- P is the principal amount (loan amount),

- r is the monthly interest rate (annual rate divided by 12 and converted to decimal),

- n is the total number of monthly installments.

In this case, Shyam borrows Rs.80,000 at a monthly interest of 1.25%, and the loan is to be repaid in 12 monthly installments.

P = Rs.80,000

r =
`(1.25)/(100 * 12) = 0.0125\]`

n = 12

Now, plug these values into the EMI formula:

EMI =
`(80000 * 0.0125 * (1 + 0.0125)^(12))/((1 + 0.0125)^(12) - 1)\]`

After evaluating this expression, we find that the EMI is approximately Rs. 7,925. Therefore, the correct answer to the given question is (c) Rs. 7,925.