If the true discount on a sum of money is $150 and the time is 1 year at 12% per

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Question: If the true discount on a sum of money is $150 and the time is 1 year at 12% per annum, what is the sum?

Options:

Correct Answer: $1200

Solution:

True Discount = Present Worth * Rate * Time / 100. Let Present Worth = P. Then, 150 = P * 12 * 1 / 100. Solving gives P = $1250.

If the true discount on a sum of money is $150 and the time is 1 year at 12% per annum, what is the sum?

If the true discount on a sum of money is $150 and the time is 1 year at 12% per annum, what is the sum?

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 = $150, Time = 1 year, Rate = 12% per annum.
Step 3: Write the formula for True Discount: True Discount = Present Worth * Rate * Time / 100.
Step 4: Let Present Worth be represented as P. So, the formula becomes: 150 = P * 12 * 1 / 100.
Step 5: Rearrange the formula to solve for P: P = 150 * 100 / (12 * 1).
Step 6: Calculate P: P = 150 * 100 / 12 = 15000 / 12 = 1250.
Step 7: Conclude that the Present Worth (sum) is $1250.

True Discount – True discount is the difference between the nominal amount due at a future date and its present worth, calculated using the formula: True Discount = Present Worth * Rate * Time / 100.
Present Worth – Present worth is the current value of a future sum of money, discounted at a specific interest rate over a certain period.
Interest Rate – The interest rate is the percentage at which interest is calculated on the principal amount over a specified time period.
Time Period – The time period is the duration for which the money is borrowed or invested, affecting the calculation of interest and discount.