A sum of money is due in 2 years. If the banker's discount on it is $200 at 10%

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Question: A sum of money is due in 2 years. If the banker\'s discount on it is $200 at 10% per annum, what is the present worth?

Options:

Correct Answer: $2000

Solution:

Banker\'s Discount = Principal × Rate × Time / 100. Let Principal = P. 200 = P × 10 × 2 / 100. P = $2000.

A sum of money is due in 2 years. If the banker's discount on it is $200 at 10% per annum, what is the present worth?

A sum of money is due in 2 years. If the banker's discount on it is $200 at 10% per annum, what is the present worth?

Step 1: Understand that the banker's discount is the interest on the principal amount (P) for a certain time period.
Step 2: The formula for banker's discount is: Banker's Discount = Principal × Rate × Time / 100.
Step 3: In this case, the banker's discount is $200, the rate is 10%, and the time is 2 years.
Step 4: Substitute the known values into the formula: 200 = P × 10 × 2 / 100.
Step 5: Simplify the equation: 200 = P × 20 / 100.
Step 6: Multiply both sides by 100 to eliminate the fraction: 20000 = P × 20.
Step 7: Divide both sides by 20 to solve for P: P = 20000 / 20.
Step 8: Calculate P: P = 1000.
Step 9: The present worth (P) is $2000.

Banker's Discount – The banker's discount is the interest calculated on the face value of a sum due at a future date, used to determine the present worth.
Present Worth Calculation – The present worth is the current value of a future sum of money, calculated by discounting the future amount back to the present using the banker's discount formula.
Interest Rate Application – Understanding how to apply the interest rate over a specified time period to calculate the banker's discount.