NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans
Ananya has a home loan with Rs 40,00,000 outstanding on a floating rate linked to an external benchmark. The RBI cuts the repo rate and the lender passes the change through at the next reset date. With the EMI kept unchanged, the most likely result is:
The loan tenure would shorten. When the floating rate falls after a repo rate cut and the EMI stays the same, more of each instalment goes towards principal and less towards interest. The balance reduces faster, so the loan gets repaid earlier than originally scheduled.
- AThe loan tenure shortensCorrect
- BThe loan tenure lengthens
- CThe principal outstanding rises immediately
- DThe EMI automatically doubles
Explanation
A lower interest rate means a larger part of each unchanged EMI goes to principal repayment. The outstanding balance then falls faster, so the loan is cleared sooner. Tenure shortens rather than lengthens, and the principal does not rise.
Did you get it right without looking?
One question tells you little. A timed set on Debt Management and Loans shows your real accuracy, how long you take and where you lose marks.
More Debt Management and Loans questions
- Under the Fixed Obligation to Income Ratio (FOIR) approach used by lenders, which of the following is included in the numerator when assessi…
- Rohit takes a reducing-balance loan of Rs 10,00,000 at 12% p.a. with interest charged monthly (1% per month) and an EMI of Rs 20,000. What i…
- Caselet: Mr. Arjun Nair has a home loan with Rs 40,00,000 outstanding, 9% p.a. floating rate, and monthly interest computed on the reducing …
- Which of the following is generally treated as a secured loan?
- Under the reducing-balance method of calculating interest on a home loan, interest for each month is charged on which amount?
- Mr. Rohan Mehta earns a gross monthly income of Rs 1,00,000 and pays total monthly EMIs of Rs 30,000 on existing loans. He wants to take ano…