Discussion
What is the present worth of a bill of ₹1,196 due 3 years hence at 8% per annum?
Answer: A
Correct answer: ₹965
The present worth is \[ \text{PW} = \frac{100 \times A}{100 + RT}, \] with \( RT = 8 \times 3 = 24 \). So \[ \text{PW} = \frac{100 \times 1196}{124} = \frac{119600}{124} = 964.52, \] which to the nearest rupee is 965. Checking forwards: 965 at 8% for three years earns about 231.60 in interest, giving 1,196.60 - the small excess being the effect of rounding. The true discount is the remainder, \( 1196 - 965 = 231 \) approximately. The distractor 1,000 is what a reader arrives at by treating the discount as interest on the face value: \( 1196 \times 0.24 = 287 \), leaving about 909, or by rounding carelessly. Applying the formula rather than working backwards from a guess avoids it.
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