CA Foundation · Quantitative Aptitude · Mathematics of Finance
Mr. Desai will receive ₹1,21,000 at the end of 2 years. If money earns 10% per annum compounded annually, what is the present value of this receipt, and how much of the receipt represents the discount?
The present value is ₹1,00,000 and the discount is ₹21,000. Dividing ₹1,21,000 by the two-year factor of 1.21 at 10% gives ₹1,00,000, and the difference between the receipt and its present value is the ₹21,000 discount.
- APV ₹1,00,000; discount ₹21,000Correct
- BPV ₹1,00,000; discount ₹24,200
- CPV ₹96,800; discount ₹24,200
- DPV ₹1,05,000; discount ₹16,000
Explanation
PV = 1,21,000 / 1.21 = ₹1,00,000. Discount = 1,21,000 - 1,00,000 = ₹21,000. The option with ₹96,800 wrongly subtracts 20% simple discount (1,21,000 × 0.8).
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