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A sum of money amounts to $1200 in 2 years at a rate of 8% per annum. What is th

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Question: A sum of money amounts to $1200 in 2 years at a rate of 8% per annum. What is the true discount?

Options:

  1. $100
  2. $120
  3. $150
  4. $180

Correct Answer: $120

Solution: 

Present Worth = Amount / (1 + rt) = 1200 / (1 + 0.08*2) = 1200 / 1.16 = $1034.48. True Discount = 1200 - 1034.48 = $165.52.

A sum of money amounts to $1200 in 2 years at a rate of 8% per annum. What is th

Practice Questions

Q1
A sum of money amounts to $1200 in 2 years at a rate of 8% per annum. What is the true discount?
  1. $100
  2. $120
  3. $150
  4. $180

Questions & Step-by-Step Solutions

A sum of money amounts to $1200 in 2 years at a rate of 8% per annum. What is the true discount?
  • Present Worth Calculation – Understanding how to calculate the present worth of a future amount using the formula Present Worth = Amount / (1 + rt).
  • True Discount – Calculating the true discount by subtracting the present worth from the future amount.
  • Interest Rate Application – Applying the interest rate correctly over the specified time period to determine the present worth.
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