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As the name suggests, the primary source of funds used to finance the acquisition of a company in a LBO is debt. The acquiring company uses a significant amount of debt to finance the acquisition, with the intention of using the cash flows from the target company to pay down the debt.
A sum of Rs.10 is lent by a child to his friend to be returned in 11 monthly instalments of Rs.1 each, the interest being simple. The rate of interest is: