Multiple choice

A is drawing Rs.1,000 p.m. on the last day of every month. If the rate of interest is 5% p.a., then the total interest chargeable from him in the accounting year will be ____________.

  1. Rs.325

  2. Rs.275

  3. Rs.300

  4. Rs.350
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

For drawings made at the end of every month, the average period is (11+0)/2 = 5.5 months. Total interest = Total drawings * Rate * Average period / 12 = 12,000 * 0.05 * 5.5 / 12 = 1,000 * 0.05 * 5.5 = 275.

AI explanation

When an equal amount is drawn at the end of every month, the average period is calculated as (Months left after first drawing + Months left after last drawing) / 2, which is (11 + 0) / 2 = 5.5 months. The total drawings for the year amount to Rs. 12,000 (Rs. 1,000 * 12). Using the simple interest formula, Interest = (Principal * Rate * Time) / 100, we get Interest = (12000 * 5 * 5.5) / (100 * 12), which simplifies to Rs. 275.

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