CASE STUDY CHALLENGE

Financial Mathematics: Home Loan EMI

Ramesh borrowed a home loan amount of ₹ 7,00,000 from a bank at an interest rate of 12% per annum for 30 years, to be paid in monthly installments.

Given Data for Calculation:

  • • For 30 years: Use (1.01)-360 = 0.02781668
  • • For 20 years: Use (1.01)-240 = 0.09180584

Answer the following:

(i) Write the formula for calculating EMI by the reducing balance method.
(ii) Write the values of P (Principal), i (Monthly Interest Rate), and n (Total Months) respectively.
(iii) (a) Find the EMI for the 30-year tenure.

— OR —

(b) If the loan is to be returned in 20 years, find the new EMI.
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