CS Professional · Banking and Insurance - Laws and Practice · Calculation of Interest and Annuities
Meera Textiles of Surat availed a term loan of ₹2,40,000 from a bank at 9% p.a. simple interest. She repaid the whole principal after exactly 8 months. How much interest is payable for the period?
The interest is ₹14,400. Simple interest equals principal times rate times time, so 2,40,000 × 9% gives ₹21,600 for a year, and for 8 months this is multiplied by 8/12. A full-year figure would overstate the interest.
- A₹21,600
- B₹14,400Correct
- C₹10,800
- D₹1,800
Explanation
Simple interest = P × R × T = 2,40,000 × 9/100 × 8/12 = ₹14,400. ₹21,600 is a full year's interest, so it ignores that the period is only 8 months. ₹10,800 is the interest for 6 months.
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