Question

Era, a partner withdrew ₹ 40,000 per month for her personal use from the firm in the beginning of each month. Interest on her drawings was calculated at ₹ 31,200 at the end of the year. Calculate the rate of interest on her drawings.

Answer 1

1. Calculate Total Drawings

Since Era withdrew ₹ 40,000 at the beginning of each month for a full year (12 months):

Total Drawings = 40,000 × 12 = 4,80,000

2. Determine the Average Period

When equal amounts are withdrawn on the first day of every month, the average period is calculated as:

Average Period = `"Months left after 1st drawing + Months left after last drawing"/2`

Average Period = `(12 + 1)2 = 6.5` months

3. Compute the Rate of Interest

Let the rate of interest be R% p.a.

Interest on drawings = `"Total drawings" xx R/100 xx "Average Period"/12`

`31,200 = 4,80,000 xx R/100 xx 6.5/12`

`31,200 = 4,800 xx R xx 6.5/12`

31,200 = 400 × 6.5 × R

31,200 = 2,600 × R

`R = (31,200)/(2,600) = 12%`