Question

Bhim International Ltd., in order to raise additional funds for expansion purposes, took a loan of ₹ 10,00,000 at a rate of 12% per annum from NZ Bank on 1st July, 2023, against which it offered ₹ 15,00,000, 8% Debentures of ₹ 100 each as collateral security.

Calculate the finance cost to the company for the year 2023-24.

Options

• ₹ 1,20,000

• ₹ 2,40,000

• ₹ 90,000

• ₹ 1,80,000

Answer 1

₹ 90,000

Explanation:

Given: 

Principal amount of the loan = ₹ 10,00,000

Rate of interest = 12%

Annual interest = Principal × Rate

=  ₹ 10,00,000 × 12%

Annual interest =  ₹ 1,20,000.

The loan was taken on 1st July, 2023, and the financial year ends on 31st March, 2024.

The interest calculation period is from July 1, 2023, to March 31, 2024, which is 9 months.

Interest for 9 months = Annual interest × `9/12`

= `₹ 1,20,000 × 9/12`

Interest for 9 months = ₹ 90,000.