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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans

A client's monthly take-home income is Rs 1,00,000. Her existing EMIs total Rs 20,000 and she wishes to take a new car loan. If her adviser applies a guideline that total EMIs should not exceed 40% of monthly income, what is the maximum EMI she can afford on the new loan?

Under a 40% ceiling, total EMIs may be Rs 40,000 on Rs 1,00,000 income. Since Rs 20,000 is already committed to existing loans, only Rs 20,000 remains for the new car loan. Ignoring existing EMIs would overstate affordability.

  1. ARs 40,000
  2. BRs 20,000Correct
  3. CRs 60,000
  4. DRs 30,000

Explanation

Total EMI limit = 40% x 1,00,000 = Rs 40,000. Existing EMIs are Rs 20,000, so the room for the new loan is 40,000 - 20,000 = Rs 20,000. Rs 40,000 ignores existing EMIs.

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