A sum of money is invested at a certain rate of interest for 4 years. If the tru

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What’s inside this PDF?

Question: A sum of money is invested at a certain rate of interest for 4 years. If the true discount is $400, what is the present worth if the rate of interest is 5%?

Options:

$1600
$2000
$2400
$2800

Correct Answer: $2000

Solution:

Let Present Worth = x. True Discount = x * Rate * Time / 100. 400 = x * 5 * 4 / 100. Solving gives x = $2000.

A sum of money is invested at a certain rate of interest for 4 years. If the tru

Practice Questions

A sum of money is invested at a certain rate of interest for 4 years. If the true discount is $400, what is the present worth if the rate of interest is 5%?

$1600
$2000
$2400
$2800

Questions & Step-by-Step Solutions

A sum of money is invested at a certain rate of interest for 4 years. If the true discount is $400, what is the present worth if the rate of interest is 5%?

Step 1: Understand the terms. Present Worth (x) is the amount of money we want to find. True Discount is the amount of money saved by not having to pay the full amount now.
Step 2: Know the formula for True Discount: True Discount = Present Worth * Rate * Time / 100.
Step 3: Substitute the known values into the formula. We know True Discount is $400, Rate is 5%, and Time is 4 years. So, we write: 400 = x * 5 * 4 / 100.
Step 4: Simplify the equation. Calculate 5 * 4 = 20. Now the equation looks like: 400 = x * 20 / 100.
Step 5: Multiply both sides by 100 to eliminate the fraction: 400 * 100 = x * 20.
Step 6: Calculate 400 * 100 = 40000. Now the equation is: 40000 = x * 20.
Step 7: Divide both sides by 20 to solve for x: x = 40000 / 20.
Step 8: Calculate 40000 / 20 = 2000. So, Present Worth (x) is $2000.

True Discount – The difference between the future value and the present worth, calculated using the interest rate and time.
Present Worth – The current value of a sum of money that will be received in the future, discounted at a specific interest rate.
Interest Rate Calculation – Understanding how to apply the interest rate in the context of time to calculate present worth.

A sum of money is invested at a certain rate of interest for 4 years. If the tru

What’s inside this PDF?

A sum of money is invested at a certain rate of interest for 4 years. If the tru

Practice Questions

Questions & Step-by-Step Solutions

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