Mr. X financed his house by taking a loan of Rs. 71, 00,000 @ 10% p.a. and has paid Rs.15, 00,000 as down payment. The loan is to be repaid in 10 equal instalments starting at the end of the first year. Calculate the amount of equal annual instalment and total interest paid upon repayment of loan.

Mr. X financed his house by taking a loan of Rs. 71, 00,000 @ 10% p.a. and has paid Rs.15, 00,000 as down payment. The loan is to be repaid in 10 equal instalments starting at the end of the first year. Calculate the amount of equal annual instalment and total interest paid upon repayment of loan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 8P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Mr. X financed his house by taking a loan of Rs. 71, 00,000 @ 10% p.a. and has
paid Rs.15, 00,000 as down payment. The loan is to be repaid in 10 equal
instalments starting at the end of the first year. Calculate the amount of equal
annual instalment and total interest paid upon repayment of loan.

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