Question

Vatsala takes a loan of Rs. 2,00,000 at an interest rate of 10% per annum for 5 years. Her EMI using flat rate method is,

• A. Rs. 20,000
• B. Rs. 1,666.6
• C. Rs. 5,000
• D. Rs. 15,000

Hint:

EMI \(=\frac{2{,}00{,}000+(2{,}00{,}000\times10\%\times5)}{60}\).

Answer 1

The Correct Option is C

Step 1: Understand the flat rate method:
In the flat rate method, interest is always worked out on the full original loan, for the whole time. It does not reduce as the loan is paid off.
EMI means equated monthly instalment, so the loan and interest are repaid in equal monthly parts.

Step 2: Recall the formula:
\[ \text{EMI}=\frac{P+P\cdot r\cdot t}{12t} \]
where \(P\) is the loan, \(r\) the yearly rate and \(t\) the years.

Step 3: Find the total interest:
\[ I=2{,}00{,}000\times0.10\times5=1{,}00{,}000 \]

Step 4: Find the total amount to repay:
\[ 2{,}00{,}000+1{,}00{,}000=3{,}00{,}000 \]

Step 5: Divide by the number of months:
There are \(5\times12=60\) months.
\[ \text{EMI}=\frac{3{,}00{,}000}{60}=5{,}000 \]

Step 6: Check the options:
Rs. 20,000 is the yearly interest, Rs. 1,666.6 is the monthly interest \(\frac{1{,}00{,}000}{60}\) alone, and Rs. 15,000 does not follow from the formula. Only Rs. 5,000 fits.

Final Answer:
The EMI is Rs. 5,000, which is option 3. \[ \boxed{\text{Rs. }5000} \]