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.
OPtion
1) A, Rs.50
2) A, Rs.70
3) B, Rs.80
4) B, Rs.70
5) A, Rs.60
6) B, Rs.100
7) B, Rs.50
8) A, Rs.90
9) B, Rs.25
10)None of these
Solution
P.W. of Rs. 1120 due 2 years hence at 6%
= Rs. [100*1120 / 100+(6*2)] = Rs.1000
P.W. of Rs. 1081.50 due 6 month hence at 6%
= Rs. [100*1081.50 / 100+(6/2)]
= Rs. [100*1081.50 / 103]
= Rs. 1050
So A owes B, Rs. 1000 cash and B owes a Rs. 1050 cash.
therefore
B must pay Rs.50 to A.