Skip to content

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

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 is the outstanding principal after the first EMI is paid?

The outstanding principal is Rs 9,90,000. First month interest at 1% on Rs 10,00,000 is Rs 10,000, so out of the Rs 20,000 EMI only Rs 10,000 reduces the principal. Treating the whole EMI as principal would wrongly give Rs 9,80,000.

  1. ARs 9,90,000Correct
  2. BRs 9,80,000
  3. CRs 9,70,000
  4. DRs 9,88,000

Explanation

First month interest = 1% x 10,00,000 = Rs 10,000. Principal repaid = 20,000 - 10,000 = Rs 10,000. Outstanding = 10,00,000 - 10,000 = Rs 9,90,000. Rs 9,80,000 wrongly treats the entire EMI as principal (ignoring interest), and Rs 9,70,000 is not supported by the data.

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.

Practise Debt Management and LoansFree diagnostic mock

More Debt Management and Loans questions