PROBLEM-IF ₹70 lakh loan is taken from the bank at 13% per annum for 15 years.

What
would be the EMI on loan?
SOLUTION-Calculation of EMI on the loan which is Amortizing debt Instrument is done by
using present value of annuity.

PV of Annuity= (
annuity
rate of interest
× ) ( (( ( 1+ rate of interest )time )−1 )
( 1+rate of interest )time )
As per this formula , PV of Annuity=Loan , Annuity=EMI
annuity
PV of Annuity=( )׿
rate %
12
EMI
Loan=( )× ¿
rate %
12

( (( ( )) )
)
12t
rate %
1+
12
EMI = Loan×
rate %
× ( )
(( ( )
12
))
12 t
rate %
1+ −1
12

EMI =¿ )

Now ( )
13 %
=0.010833 … ..∧( 12 ×15=180 )
12

( 70,00,000 × 0.010833× ( ( 1+0.010833 ) )

)
180

EMI = 180
( 1+0.010833 ) −1

EMI = (
75,833.33 × ( 1.010833 180 )
1.010833180 −1 )
75,833.33 ×6.9553641
EMI =( )
6.9553641−1
75,833.33× 6.9553641
EMI =
5.9553641
5,27,448.44
EMI =
5.9553641
EMI =₹ 88,566.95