The true discount on a bill due in 9 months at 16% per annum is Rs. 189. Find the total bill amount:
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Answer: B. Rs. 1764
Explanation
Substituting the true discount, interest rate, and time period into the discount formula yields the principal. Solving the equation for the total bill amount incorporates the nine month duration at sixteen percent. The exact calculation produces a total bill amount of seventeen sixty four currency units. True discount represents the interest on the present worth of a bill due at a future date. Time periods in financial formulas must be expressed in fractional years for annual interest rates. Present worth plus true discount equals the total face value amount of the bill.
Commercial banking transactions discount promissory notes and bills of exchange prior to maturity. Corporate finance managers calculate present values of future cash flows using annual discount rates. Financial auditors verify interest calculations on short term commercial debt instruments. Option a underestimates the total bill amount due to an incorrect time conversion fraction. Option c results from an arithmetic error during the present worth equation solving steps. Option d overestimates the bill total by applying an incorrect interest rate multiplier.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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