Calculation of Interest on Government Securities:

To calculate the interest on government securities, we need to consider the principal amount, the interest rate, and the time period for which the investment is made.

Principal Amount:
The principal amount in this case is 100,000 rupees.

Cost of Government Security:
The cost of the government security is 95,000 rupees.

Interest Rate:
The interest rate for the government security is 5%.

Calculation:

To calculate the interest, we can use the formula:

Interest = (Principal Amount * Interest Rate * Time Period) / 100

In this case, the time period is not mentioned. Let's assume it to be 1 year for simplicity.

Interest = (100,000 * 5 * 1) / 100
Interest = 5,000 rupees

Therefore, the interest on the government security will be 5,000 rupees.

Explanation:

Government securities are financial instruments issued by the government to raise funds. They are considered safe investments as they are backed by the government. The interest rate on government securities is fixed and paid out periodically.

In this case, the government security has a principal amount of 100,000 rupees and a cost of 95,000 rupees. The cost may be lower than the principal amount due to market conditions or other factors. The interest rate is 5%.

To calculate the interest, we use the formula mentioned above. The time period is assumed to be 1 year. By substituting the values into the formula, we find that the interest on the government security is 5,000 rupees.

It is important to note that the interest earned on government securities is taxable. The actual returns may vary based on the prevailing interest rates and the time period for which the investment is made.

This investment in government securities provides a fixed return and is considered a secure investment option for individuals and institutions. The interest earned can be a source of income or can be reinvested to generate further returns.