A company has issued 10% Debentures of Face Value of Rs. 5,00,000 as Collateral Security against Rs. 6,00,000, 12% Bank Loan. What amount of total interest will be paid by company for the whole year:-

Rs. 72,000

The correct answer is Option 3- Rs. 72,000. 

• Debentures issued as collateral security are not meant for raising funds directly, so no interest is paid on them.
• Interest is payable only on the actual loan taken from the bank. 

Loan amount from bank = 6,00,000
Interest rate on bank loan = 12%
Interest = 6,00,000 x 12/100
            = 72,000

So, total interest paid by the company is 72,000.