CASE STUDY CHALLENGE

Financial Math: Home Loan Amortization

A man took a home loan of ₹ 40,00,000 from a bank at the interest rate of 6.75% per annum compounded monthly, which is to be amortized by equal payments at the end of each month for 10 years.

 

Given Data & Hints:

  • • Principal (P) = ₹ 40,00,000
  • • Rate (r) = 6.75% p.a. monthly
  • • Hint 1: (1.005625)-120 = 0.510120
  • • Hint 2: (1.005625)60 = 1.400115

Answer the following:

(i) Find the monthly instalment (EMI). [1]
(ii) Find the principal outstanding at the beginning of the 61st month. [1]
(iii)

(a) Find the interest amount paid in the 61st instalment.

— OR —

(b) Find the principal amount paid in the 61st instalment.

 [2]
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