Question

Assertion (A): In case ₹ 20,00,000, 8% debentures are outstanding and one-fifth of these debentures are to be redeemed, transfer to DRR will be ₹ 40,000.

Reason (R): In such case, amount invested in Debenture Redemption Investment will be ₹ 60,000.

In the context of the above two statements, which of the following is correct?

Options

• (A) and (R) both are correct and (R) correctly explains (A).

• Both (A) and (R) are correct but (R) does not explain (A).

• Both (A) and (R) are incorrect.

• (A) is incorrect but (R) is correct.

Answer 1

(A) is incorrect but (R) is correct.

Explanation:

1. 10% of ₹ 4,00,000 (one-fifth of ₹ 20,00,000) equals ₹ 40,000, but DRR is not required for listed companies. 
2. 15% of ₹ 4,00,000 = ₹ 60,000 must be invested in Debenture Redemption Investment as per the rule.