A trader owes a merchant Rs. 901 due 1 year's hence. However, the trader wants to settle the account after 3 months. How much cash should he pay, If rate of interest is 8% per annum?
Correct Answer: Rs. 850
Explanation:
P.W. of Rs. 901 due 9 months hence at 8%
= Rs { (100 x 901) / (100 + (8 x 3 / 4))} = Rs. (100 x 901) / 106
= Rs. 850
