Formula to Calculate Interest
In order to calculate the interest on Mr. Ashok's drawings at 10% p.a. for the year ended 31st March 2019, we will be using the Simple Interest formula which is:
Simple Interest (SI) = (P x R x T) / 100
where, P = principal amount, R = rate of interest, and T = time period.
Steps to Calculate Interest for Each Case
Let's look at each case separately:
Case 1: If Ashok withdrew Rs. 7,500 at the beginning of each quarter, then his total withdrawal for the year would be:
Rs. 7,500 x 4 = Rs. 30,000
Interest Rate = 10% p.a.
To calculate the interest, we can use the simple interest formula: I = P x R x T, where I is the interest, P is the principal, R is the rate of interest, and T is the time period.
In this case,
P = Rs. 30,000, R = 10%, and T = 7.5/12
Therefore, I = 30,000 x 10/12 x 7.5/12
Total interest is Rs. 1,875.
Case 2: If Ashok withdrew Rs. 7,500 at the end of each quarter, then his total withdrawal for the year would also be Rs. 30,000. However, since the withdrawals are made at the end of each quarter, interest is calculated for a period of 4.5 months.
Interest on drawings = 30000 x 10/100 x 4.5/12= Rs. 1,125
Case 3: If Ashok withdrew Rs. 7,500 during the middle of each quarter, then we need to assume that the withdrawals were made exactly at the midpoint of each quarter.
So, interest is calculated for a period of 6 months.
Interest on drawings= 30000 x 6/12 x 10/100 = Rs. 1,500
Calculate interest on drawings of Ashok at 10% p.a. for the year ended 31 March 2019, in each of the following alternative cases:
In case 1, the interest on drawing would be Rs. 1,875, Rs. 1,125 for case 2, and Rs 1,500 for case 3. The interest is calculated using the Simple Interest formula i.e. SI = P x R x T.
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