Read the following case study and answer question.

Rancho Ltd. was running successfully since last 8 years. Post covid there were some financial problems face by firm, like many industries were facing. Due to their past reputation they could manage the permission from SEBI for issuing of shares on 1 Aug, 2022. They also decided to issue 12% Debentures of 100 each at 10% Discount and were to be redeemed at 25% premium in such a way that they could arrange fund of Rs 45,00,000. At the time of issue of Debenture they also issued equity Share of Rs30,00,000 at 20% premium.

What will be the amount of premium on Redemption of Debentures?

Rs 12,50,000

The correct answer is option (3) : Rs 12,50,000.

No of debentures issued = Fund/issue price
                                    = 45,00,000/90
                                    = 50,000

Premium = 25% of face value i.e. 100
             = 25

Total premium on redemption = 50,000 x 25
                                           = ₹12,50,000