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CS Professional · Banking and Insurance - Laws and Practice · Calculation of Interest and Annuities

A bank lends Rs 2,00,000 to Meera at 12% per annum simple interest on 1 April. She repays the entire principal and interest on 30 June of the same year (91 days; take a 365-day year). What interest is payable, to the nearest rupee?

The interest payable is about Rs 5,984. Daily-basis simple interest is principal times rate times days divided by 365 x 100, so 2,00,000 x 12% x 91/365 equals Rs 5,983.56. Treating the period as a full quarter would wrongly give Rs 6,000.

  1. ARs 6,000
  2. BRs 5,984Correct
  3. CRs 5,918
  4. DRs 6,082

Explanation

Interest = 2,00,000 x 12 x 91 / (100 x 365) = 24,000 x 91 / 365 = 2,184,000/365 = Rs 5,983.56, about Rs 5,984. Rs 6,000 wrongly treats the period as exactly a quarter (3 months). Rs 5,918 would use 90 days.

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