2023 · Q19
In a business dealing, A owes B Rs. 20,000 payable after 5 years, whereas B owes A Rs. 12,000 payable after 4 years. They want to settle it now at the rate of 5% simple interest. Who gives how much money in this settlement?
Elementary MathematicsSimple and Compound Interest
- ABoth are at par
- BB gives Rs. 6,000 to A
- CA gives Rs. 6,000 to B
- DA gives Rs. 4,000 to B
Explanation
At 5% simple interest the present values are: A's debt 20000/(1 + 5 × 0.05) = Rs 16000, and B's debt 12000/(1 + 4 × 0.05) = Rs 10000. Net, A owes B Rs 16000 − Rs 10000 = Rs 6000 today. So A gives Rs 6,000 to B (C).