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A sum of money amounts to $1200 in 3 years at a certain rate of interest. If the

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Question: A sum of money amounts to $1200 in 3 years at a certain rate of interest. If the true discount is $300, what is the present worth?

Options:

  1. $900
  2. $1000
  3. $1100
  4. $1200

Correct Answer: $900

Solution: 

Present Worth = Amount - True Discount. Therefore, Present Worth = 1200 - 300 = $900.

A sum of money amounts to $1200 in 3 years at a certain rate of interest. If the

Practice Questions

Q1
A sum of money amounts to $1200 in 3 years at a certain rate of interest. If the true discount is $300, what is the present worth?
  1. $900
  2. $1000
  3. $1100
  4. $1200

Questions & Step-by-Step Solutions

A sum of money amounts to $1200 in 3 years at a certain rate of interest. If the true discount is $300, what is the present worth?
  • Step 1: Understand that the total amount after 3 years is $1200.
  • Step 2: Know that the true discount is $300.
  • Step 3: Use the formula for Present Worth, which is: Present Worth = Amount - True Discount.
  • Step 4: Substitute the values into the formula: Present Worth = 1200 - 300.
  • Step 5: Calculate the result: Present Worth = 900.
  • Present Worth Calculation – Understanding how to calculate present worth using the amount and true discount.
  • True Discount – Knowledge of what true discount means in the context of finance.
  • Time Value of Money – Recognizing the impact of time on the value of money and interest rates.
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