Using flat rate method, the EMI to repay a loan of ₹ 20,000 in $2 \frac{1}{2}$ years at an interest rate of 8% per annum is :

Answer: ₹ 800

Step-by-step solution

Step 1: Calculate Total Interest

First, we need to calculate the total interest accrued over the loan period. The principal amount is ₹20,000, the annual interest rate is 8%, and the loan duration is $2 \frac{1}{2}$ years.

Step 2: Substitute Values and Compute Interest

Substitute the given values into the formula: Principal = ₹20,000, Rate = 8% or 0.08, and Time = 2.5 years. This gives us a total interest of ₹4,000.

Step 3: Calculate Total Amount Payable

Next, we find the total amount that needs to be repaid, which is the sum of the principal loan amount and the total interest calculated.

Step 4: Compute Total Amount

Adding the principal of ₹20,000 and the total interest of ₹4,000, we get a total payable amount of ₹24,000.

Step 5: Calculate Number of Months

To calculate the Equated Monthly Installment (EMI), we need to determine the total number of months over which the loan will be repaid. The loan duration is $2 \frac{1}{2}$ years.

Step 6: Compute Total Months

Multiplying 2.5 years by 12 months per year gives us a total of 30 months.

Step 7: Calculate EMI

Finally, to find the EMI, we divide the total amount payable by the total number of months.

Step 8: Compute EMI Value

Dividing ₹24,000 by 30 months, we find that the EMI is ₹800.

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Using flat rate method, the EMI to repay a loan of ₹ 20,000 in 2122 \frac{1}{2}221​ years at an interest rate of 8% per annum is :