A owes B, Rs. 1120 payable 2 years hence and B owes A, Rs. 1081.50 payable 6 months hence. If they decide to settle their accounts forthwith by payment of ready money and the rate of interest be 6% per annum, then who should pay and how much?

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Accepted Answer

P.W. of Rs. 1120 due 2 years hence at 6%
= Rs. [{100 x 1120} / {100 + (6 x 2)}] = Rs. 1000
P.W. of Rs. 1081.50 due 6 months hence at 6%
= Rs. [ {100 x 1081.50} / {100 + (6 x 1/2)} ]
= Rs [ (100 x 1081.50) / 103 ] = Rs. 1050
So, A owes B, Rs. 1000 cash and B owes A Rs. 1050 cash.
∴ B must pay Rs. 50 to A.

A owes B, Rs. 1120 payable 2 years hence and B owes A, Rs. 1081.50 payable 6 months hence. If they decide to settle their accounts forthwith by payment of ready money and the rate of interest be 6% per annum, then who should pay and how much?

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