If the true discount on a sum of money is $250 and the present worth is $1250, w

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Question: If the true discount on a sum of money is $250 and the present worth is $1250, what is the time period at 8% per annum?

Options:

Correct Answer: 2 years

Solution:

True Discount = Present Worth * Rate * Time / 100. 250 = 1250 * 8 * Time / 100. Time = (250 * 100) / (1250 * 8) = 2 years.

If the true discount on a sum of money is $250 and the present worth is $1250, what is the time period at 8% per annum?

If the true discount on a sum of money is $250 and the present worth is $1250, what is the time period at 8% per annum?

Step 1: Understand the terms. True Discount is the amount deducted from the future value to get the present worth.
Step 2: Identify the given values. True Discount = $250, Present Worth = $1250, Rate = 8% per annum.
Step 3: Write down the formula for True Discount: True Discount = Present Worth * Rate * Time / 100.
Step 4: Substitute the known values into the formula: 250 = 1250 * 8 * Time / 100.
Step 5: Simplify the equation. Multiply both sides by 100 to eliminate the fraction: 250 * 100 = 1250 * 8 * Time.
Step 6: Calculate the left side: 25000 = 1250 * 8 * Time.
Step 7: Calculate 1250 * 8: 1250 * 8 = 10000.
Step 8: Now the equation is: 25000 = 10000 * Time.
Step 9: Solve for Time by dividing both sides by 10000: Time = 25000 / 10000.
Step 10: Calculate the final answer: Time = 2 years.

True Discount – The difference between the nominal amount due at a future date and its present worth.
Present Worth – The current value of a sum of money that will be received in the future, discounted at a specific interest rate.
Time Period Calculation – Determining the duration for which the money is invested or borrowed based on the discount and interest rate.
Interest Rate – The percentage at which interest is charged or paid on the principal amount.