Read the following information and answer the question.

ABC Ltd. issued 20,000, 6% debentures of ₹100 each at a discount of 4% redeemable at a premium of 5% after 3 years from 1st April 2017. The amount payable on the application is ₹50 and the balance on the allotment. The company has a balance of ₹50,000 in securities premium reserve and ₹1,00,000 in the capital reserve. Profit earned by the company in the year is ₹75,000.

What is the amount of interest on debentures to be paid by the company annually?

₹1,20,000

The correct answer is option 2- ₹1,20,000.

Face value of debentures = ₹100
No of debentures = 20,000
Interest is 6%
Total interest paid = 20,000 x 100 x 6/100
                             = 20,00,000 x 6/100
                             = ₹1,20,000