A sum of $1500 is due in 4 years. If the banker's discount is $240 at 6% per ann

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Question: A sum of $1500 is due in 4 years. If the banker\'s discount is $240 at 6% per annum, what is the present worth?

Options:

Correct Answer: $1260

Solution:

Banker\'s Discount = P × R × T / 100. 240 = P × 6 × 4 / 100. P = $1260.

A sum of $1500 is due in 4 years. If the banker's discount is $240 at 6% per annum, what is the present worth?

A sum of $1500 is due in 4 years. If the banker's discount is $240 at 6% per annum, what is the present worth?

Step 1: Understand that the banker's discount is the interest on the present worth (P) for the time period (T) at a certain rate (R).
Step 2: Identify the values given in the problem: Banker's Discount = $240, Rate (R) = 6%, Time (T) = 4 years.
Step 3: Use the formula for Banker's Discount: Banker's Discount = P × R × T / 100.
Step 4: Substitute the known values into the formula: 240 = P × 6 × 4 / 100.
Step 5: Simplify the equation: 240 = P × 24 / 100.
Step 6: Multiply both sides by 100 to eliminate the fraction: 24000 = P × 24.
Step 7: Divide both sides by 24 to solve for P: P = 24000 / 24.
Step 8: Calculate the value: P = 1000.
Step 9: Therefore, the present worth is $1000.

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, discounted at a specific interest rate over a certain period.
Interest Rate Application – Understanding how to apply the interest rate to calculate the banker's discount and subsequently the present worth.