NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans
Meera borrows Rs 10,00,000 at 12% p.a. interest compounded monthly, repayable in equal monthly instalments. For the first instalment, what portion of the EMI is interest?
Rs 10,000 of the first EMI is interest. The monthly rate is 1 per cent (12 per cent divided by 12), and it applies to the full opening balance of Rs 10,00,000, giving Rs 10,000 for the first month.
- ARs 1,000
- BRs 10,000Correct
- CRs 12,000
- DRs 1,20,000
Explanation
Monthly rate = 12%/12 = 1%. Interest for month 1 = 1% x 10,00,000 = Rs 10,000. Rs 1,20,000 is a full year's interest, and Rs 12,000 wrongly applies the annual rate to one month.
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