If the true discount on a sum is $80 and the sum is due in 2 years at a rate of

₹0.0

Question: If the true discount on a sum is $80 and the sum is due in 2 years at a rate of 10% per annum, what is the present worth?

Options:

Correct Answer: $800

Solution:

Let Present Worth = x. True Discount = x * Rate * Time / 100. 80 = x * 10 * 2 / 100. Solving gives x = $800.

If the true discount on a sum is $80 and the sum is due in 2 years at a rate of 10% per annum, what is the present worth?

If the true discount on a sum is $80 and the sum is due in 2 years at a rate of 10% per annum, what is the present worth?

Step 1: Understand the terms. The 'true discount' is the amount deducted from the future sum to find its present worth.
Step 2: Identify the given values. True discount = $80, Rate = 10% per annum, Time = 2 years.
Step 3: Set up the formula for true discount: True Discount = Present Worth * Rate * Time / 100.
Step 4: Substitute the known values into the formula: 80 = x * 10 * 2 / 100.
Step 5: Simplify the equation: 80 = x * 20 / 100.
Step 6: Multiply both sides by 100 to eliminate the fraction: 8000 = x * 20.
Step 7: Divide both sides by 20 to solve for x: x = 800.
Step 8: Conclude that the Present Worth is $800.

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.