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

Rohit Menon borrows Rs 1,00,000 at a flat interest rate of 10% per annum for 2 years, repayable in 24 equal monthly instalments. What is the monthly instalment under the flat-rate method?

The monthly instalment is Rs 5,000. Flat interest is Rs 1,00,000 x 10% x 2 years, which is Rs 20,000, so total repayment is Rs 1,20,000. Dividing this by 24 monthly instalments gives Rs 5,000 per month.

  1. ARs 4,167
  2. BRs 5,000
  3. CRs 4,583Correct
  4. DRs 5,417

Explanation

Flat interest = 1,00,000 x 10% x 2 = Rs 20,000. Total repayable = Rs 1,20,000. Dividing by 24 gives Rs 5,000. Check: 5,000 x 24 = 1,20,000, which equals principal plus interest. Rs 4,167 is principal only (1,00,000/24), and Rs 4,583 is computed with one year's interest only.

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