Maneesh took a loan of ₹ 9,00,800 from bank at an interest rate of 6% per annum for 10 years. If she has to pay the loan back with the help of equal monthly installments (EMI). Then, the EMI using reduced balance method is (approx):

[Given: $(1.005)^{-120}=0.5496$]

Given information:

• Loan Amount (Principal) = ₹9,00,800
• Interest Rate = 6% per annum
• Loan Period = 10 years
• $(1.005)^{-120} = 0.5496$

Annual interest rate = 6%

Monthly interest rate $r = \dfrac{6\%}{12} = 0.5\% = 0.005$

Loan period = 10 years

Total number of months $n = 10 \times 12 = 120$ months

The EMI formula for reduced balance method:

$\text{EMI} = P \times r \times \dfrac{(1+r)^n}{(1+r)^n - 1}$

Where:

• $P = 9,00,800$
• $r = 0.005$
• $n = 120$

Given: $(1.005)^{-120} = 0.5496$

Since $(1.005)^{-120} = \dfrac{1}{(1.005)^{120}}$

$(1.005)^{120} = \dfrac{1}{0.5496} = 1.8196$ (approx)

$\text{EMI} = 9,00,800 \times 0.005 \times \dfrac{1.8196}{1.8196 - 1}$

$\text{EMI} = 9,00,800 \times 0.005 \times \dfrac{1.8196}{0.8196}$

$\text{EMI} = 4,504 \times \dfrac{1.8196}{0.8196}$

$\text{EMI} = 4,504 \times 2.220$

$\text{EMI} = 9,999.7 \approx 10,000$

Therefore, the EMI is approximately ₹10,000.