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If the true discount on a sum is $250 and the sum is due in 5 years at a rate of

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Question: If the true discount on a sum is $250 and the sum is due in 5 years at a rate of 10% per annum, what is the present worth?

Options:

  1. $2000
  2. $2250
  3. $2500
  4. $2750

Correct Answer: $2000

Solution: 

Let Present Worth = x. True Discount = x * Rate * Time / 100. 250 = x * 10 * 5 / 100. Solving gives x = $5000.

If the true discount on a sum is $250 and the sum is due in 5 years at a rate of

Practice Questions

Q1
If the true discount on a sum is $250 and the sum is due in 5 years at a rate of 10% per annum, what is the present worth?
  1. $2000
  2. $2250
  3. $2500
  4. $2750

Questions & Step-by-Step Solutions

If the true discount on a sum is $250 and the sum is due in 5 years at a rate of 10% per annum, what is the present worth?
  • True Discount – True discount is the difference between the future value and the present worth, calculated based on the interest rate and time.
  • Present Worth Calculation – Present worth is the current value of a future sum of money, discounted at a specific interest rate over a certain period.
  • Interest Rate Application – Understanding how to apply the interest rate in the context of discounting future cash flows.
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