A debt of Rs. 2,200 is due in 2 years. If the rate of simple interest is 5% per annum, what cash payment settles it today?
Correct answer C. Rs. 2,000
Explanation
A fair cash settlement today is the present worth of the debt: PW = 2,200 × 100/(100 + 5 × 2) = 2,200 × 100/110 = Rs. 2,000.
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