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What is the present worth of Rs.1,100 due in 2 years at 5% simple interest per annum?
Rs.3,000
Rs.2,000
Rs.1,000
Rs.1,500
To determine the present worth (or present value) of Rs. 1,100 due in 2 years at a 5% simple interest rate:
- Present Worth Formula: PW = F / (1 + rt), where F is the future value, r is the interest rate, and t is the time in years.
- Calculate: PW = 1,100 / (1 + 0.05 * 2) = 1,100 / 1.10 = 1,000.
- Conclusion: The present worth of Rs. 1,100 due in 2 years at 5% simple interest is Rs. 1,000.
Now, let's discuss the options:
- Option 1, Rs. 3,000: Much higher than the calculated present worth.
- Option 2, Rs. 2,000: Also higher than the present worth.
- Option 3, Rs. 1,000: Matches the calculated present worth.
- Option 4, Rs. 1,500: Greater than the present value.
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