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A sum of money amounts to $8000 in 4 years at a rate of 8% per annum. What is th

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Question: A sum of money amounts to $8000 in 4 years at a rate of 8% per annum. What is the true discount?

Options:

  1. $600
  2. $700
  3. $800
  4. $900

Correct Answer: $700

Solution: 

Present Worth = Amount / (1 + rt) = 8000 / (1 + 0.08*4) = 8000 / 1.32 = $6060.61. True Discount = 8000 - 6060.61 = $1939.39.

A sum of money amounts to $8000 in 4 years at a rate of 8% per annum. What is th

Practice Questions

Q1
A sum of money amounts to $8000 in 4 years at a rate of 8% per annum. What is the true discount?
  1. $600
  2. $700
  3. $800
  4. $900

Questions & Step-by-Step Solutions

A sum of money amounts to $8000 in 4 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 for present value.
  • True Discount – Calculating the true discount by finding the difference between the future amount and the present worth.
  • Interest Rate Application – Applying the interest rate correctly over the specified time period to determine the present value.
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