True Discount Concept
Posted by
Ravi Kumar at Sunday, July 10, 2011
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General Concept:
Suppose a man has to pay Rs.156 after 4 years and the rate of interest is 14%per annum.
Clearly ,Rs.100 at 14% will amount to Rs156 in 4 years
So,the payment of Rs.100 now wil cear off the debt of Rs156 due 4 years hence
We say that Sum due = Rs156 due 4 years hence Present Worth =Rs100
True Discount=Rs.156Rs100=Rs56=SumduePW
We define
TrueDiscount= Interest on Present Worth(PW) Amount = PresentWorth+TrueDiscount
Formulae:
Let rate=R%per annum, Time= T years
1.Present worth (PW) = (100*Amount)/(100+(R*T))
= (100* TrueDiscount)/(R*T)
2.TrueDiscount (TD) = (P.W*R*T)/100
= (Amount*R*T)/(100+(R*T))
3.Sum =(SimpeInterest*TrueDiscount)/(SimpleInterestTrueDiscount)
4.SimpleInterestTrueDiscount=SimpeInterest on TrueDiscount
5.When the sum is put at CompoundInterest,then
PresentWorth=Amount/(1+(R/100))^T