Question

A deposit of Rs. 1,10,000 was made for 31 days. The net interest after deducting 20% withholding tax is Rs. 890.36. Find the rate of return annually.

Answer 1

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Answer 2

The rate of return annually is 11.75%

Explanation:

For computing the annual rate of return, we have to determine the interest before tax which is shown below:

Interest before tax would be

= (Net interest after deducting withholding tax) ÷ (1 - withholding tax)

= ($890.36) ÷ (1 - 0.20)

= $1,112.95

Now the interest date for 31 days would be

= $1,112.95 ÷  $110,000

= 1.01%

So, the annual rate of return would be

= 1.01% × 360 days ÷ 31 days

= 11.75%

We assume there are 360 days in a year

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