Question

Calculate interest on Drawings in each case when amount of drawings in each case is Rs 1000 and rate of interest is @ 10% p.a. a) Drawings is made in the middle of every month for 6 months. b). Drawings is made in the beginning of each quarter. c). Drawings is made at the end of each month for 9 months.

Answer 1

Given data:

• A fixed amount of Rs 1,000 is withdrawn (a) for 6 months, in the middle of every month, (b) at the beginning of each quarter and (c) at the end of each month for 9 months.
• The rate of interest is charged at 10% p.a.

To find: The interest on drawings.

Answer:

(a) When drawings are made in the middle of every month,

Interest on drawings = (Total drawings × Rate × 6) ÷ (100 × 12)

We have:

• total drawings = Rs 1,000 × 6 = Rs 6,000 [∵ the drawings were made for 6 months]
• rate = 10

Substituting these values in the formula,

Interest on drawings = (Rs 6,000 × 10 × 6) ÷ (100 × 12)

Interest on drawings = Rs 3,60,000 ÷ 1200

Interest on drawings = Rs 300

Therefore, the interest on drawings made in the middle of every month for 6 months at an amount of Rs 1,000 is Rs 300.

(b) When drawings are made at the beginning of each quarter,

Interest on drawings = (Total drawings × Rate × 7.5) ÷ (100 × 12)

We have:

• total drawings = Rs 1,000 × 4 = Rs 4,000 [∵ quarters ⇒ 4]
• rate = 10

Substituting these values in the formula,

Interest on drawings = (Rs 4,000 × 10 × 7.5) ÷ (100 × 12)

Interest on drawings = Rs 3,00,000 ÷ 1200

Interest on drawings = Rs 250

Therefore, the interest on drawings made at the beginning of each quarter at an amount of Rs 1,000 is Rs 250.

(c) When drawings are made at the end of every month,

Interest on drawings = (Total drawings × Rate × 5.5) ÷ (100 × 12)

We have:

• total drawings = Rs 1,000 × 9 = Rs 9,000 [∵ the drawings were made for 9 months]
• rate = 10

Substituting these values in the formula,

Interest on drawings = (Rs 9,000 × 10 × 5.5) ÷ (100 × 12)

Interest on drawings = Rs 4,95,000 ÷ 1200

Interest on drawings = 412.5

Therefore, the interest on drawings made at the end of every month for 9  months at an amount of Rs 1,000 is Rs 412.5.