Question 104

A is to pay B, 600 after 4 years time at 10% per annum interest rate compounding annually. A offers to pay up B at present. What discount percent should B allow A ?

Solution

As it is given that A will pay Rs 600 after 4 years at 10% per annum

then present value of Rs 600 = $$\frac{600}{(1 + \frac{10}{100})^4}$$

Present value = Rs 409.8

Discount amount = 600 - 409.8 = 190.19

Disocunt % = $$\frac{190.19}{600}$$ x 100 = 31.69%

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