True Discount (Ch16)

VISHAL JALAN (THE MATHS GURU) PURE TEACHING, NOTHING ELSE
CHAPTER: 16
TRUE DISCOUNT
16.1 DEFINITION
Suppose A has borrowed money from B. A sum of Rs 160 is due 4 years hence. But the borrower A wants to clear off the
debt right now, i.e. 4 years before the due date. Hence, A will have to pay definitely less than Rs 160. In fact, the money
which amounts to Rs 160 after 4 years at a standard or agreed rate of interest, should be the amount paid by A to clear off
his debt right now.
Let the rate of interest in this case be 15% per annum. Then Rs 100 now becomes 160 after 4 years at the rate of 15% per
annum. So, A pays Rs 100 right now, it is as good as to pay Rs 160 after 4 years from right now.
The sum due is called the Amount. The money to be paid right now is called the Present Worth (PW) of the sum due. The
difference between the amount and the present worth is called the True Discount.
So, here true discount for A = 160 - 100 = Rs 60
[i.e. interest on Rs 100 for 4 years at 15% per annum)
So, True Discount = the interest on the present worth (PW) for the time which will elapse before the debtor bill is due to
be discharged.
100
.) . (
. .
T R W P
D T

16.2 IMPORTANT FORMULAE

(a) .) . (
100
.) . (
. . W P P
T R W P
D T

(b)
,
_
100
1
. .
RT
P
W P
(c)
,
_
RT
P
D T
100
1
. .
(d)
100
. .
T R P
I S

(e)
) (
. . . .
TD SI
D T I S
P
(f)
100
. .
. . . . . . on . .
T R D T
D T I S D T I S

(g)
T
R
P
W P
,
_
100
1
. .
, when the sum is put at compound interest.
(h)
1
2
2
1
100
100
) (
) (
RT
RT
PW
PW
+
+
Where PW1 = present worth of an amount due in T1 years

PW2 - present worth of the same amount due in T2 years . .
R - rate of interest per annum
JALAN TUTORIALS, 13/5, SWARN PATH, MANSAROWAR, JAIPUR (M: 9828266445)
(i)
) 100 ( 100
. .
RT
T R P T R PW
PW P D T
+

(ii)
( )
( )
2 2 2
1 1 1
2 2 2
1 1 1
2
1
2
1
.) . (
.) . (
T R TD P
T R TD P
T R PW
T R PW
PW P
PW P
D T
D T

(k) Installments to pay-off debt

Suppose borrower is to pay a sum of Rs P due after T years hence, but he wants to pay through equal installments at an
agreed interval (may be quarterly, monthly, half-yearly or yearly) to discharge off his debt in T years.
Hence, through equal installment payments, the debt of Rs P due in T years is cleared in T years.
Then,
2
) 1 (
100

+
n n
y
r a
a n P
Where P = amount due after T years hence,
n = number of installments to be actually paid to discharge the debt,
r = rate per cent per annum charged on simple interest,
y = number of installments per year,
= 1, if yearly installment is paid,
= 4, if quarterly installment is paid,
= 2, if half yearly installment is paid,
= 12, if monthly installment is paid,
a = Amount of each installment in Rs
(l)
Price) Sale (P
100
100
. .
) % 100 (
100
RT
P
P C
l or g
PW
Where PW - Present worth of the amount P Rs given on credit for time T at R% per annum
C.P - Cost price of the article
% g or % l per cent gain or per cent loss.
Sale price S.P. = P = Amount of the bill due in T years hence (sale price of the article)
(m) Present Worth of a sum due in N equal installment.
( ) ( )
1
]
1
+
+
+
+
.......
100
1
100
1 100
2 1
RT RT N
P
PW
T1,T2 - time for each installment to be paid.
SOLVED EXAMPLES
E-1 Find the present worth (P.W.) and the true discount reckoning 6% per annum simple interest of Rs 176 due in 20 months
time.
S-1 Using the formula.
12
100
20 6
1
176
100
1
. .
,
_
RT
P
W P
= Rs 160
T.D = P - P.W =176 - 160 =16.
E-2 Find the present worth of a bill of Rs 2420 due 2 years hence at 10% compound interest. Also find the true discount.
S-2 Here sum is put on compound interest, hence using the formula,
2000 . Rs
100
10
1
2420
100
1
. .
2

,
_
,
_
T
R
P
W P
T.D = P.W. - P
True Discount = 2,420 - 2,000 = Rs 420.
E-3 The true discount on a bill due 8 months hence at 12% per annum is Rs 240. Find the amount of the bill and its present
worth.
S-3 using the formula,
Present worth,
3000 Rs.
12
8
12
240 100 . . 100
. .
T R
D T
W P
Present worth is Rs 3,000
P = Amount of the bill = P.W. + T.D = 3,000 + 240 =3,240.
E-4 Find the difference between simple interest and true discount on Rs 960due A years hence at 5% per annum simple
interest.
S-4 Using the formula,
32. Rs.
120 100
20 20 960
) 5 4 100 ( 100
) 5 4 ( 960
) 100 ( 100
) (
. . . .
2
2
+

+

RT
RT P
D T I S
E-5 The difference between the simple interest and the true discount on a certain sum for 6 months at 4% is Rs 15. Find the
sum.
S-5
) 100 ( 100
) (
. . . .
2
RT
RT P
D T I S
+

Rs.38250.
,
_
,
_

P
P
2
1
4 100 100
2
1
4
15
2
E-6 The true discount on Rs 2040 due after a certain time at 6% per annum is 40. Find the time after which it is due.
6 2000
40 100
.) . (
. . 100 . . 100
R D T P
D T
R PW
D T
T
(Since PW = P T.D.)
=2/6 year = 4 months
The bill is due 4 months hence.
E-7 The true discount on Rs 1,860 due 3 years hence is Rs 60. Find the rate per cent.
T.D.) P PW (Since % 10
3 1800
60 100
) (
. . 100
. . 100

T TD P
D T
T PW
D T
R
The rate per cent is 10% per annum.
E-8 The true discount on a bill due 5 months hence at 12 % per annum is Rs 75. Find the amount of the bill.
S-8 using the formula,
1
1
1
1
]
1
+
1
]
1
+
12
5
12
100
1 75
100
1 . . Amount
RT
D T P
Rs.1575 21 75
Amount of the bill is Rs 1,575.
E-9 The true discount on a certain sum of money due 6 years hence is Rs 200 and the simple interest on the same sum for the
same time and at the same rate is Rs 300. Find the sum and the rate per cent.
%
3
2
16 %
3 600
300 100
. . 100
) (
600 . 600 .
100
200 300
.) . ( .) . (
. . . .

T P
I S
R Rate
Rs is sum The Rs
D T I S
D T I S
P Sum
The rate % is 16
3
2
% per annum.
E-10 If Rs 60 be the true discount on Rs 240 for a certain time, what is the discount on the same sum for double the time, the
rate being the same in both the cases?
( )
( )
96 Rs. 5 480
2
3
60 2
180 240
2 ) 240 (
) 60 240 ( 60
) (
) (
2 2
2
2
2 2
2 2 2
1 1 1
2
1

TD TD
TD
TD
T R TD
T R
TD
T R TD P
T R TD P
TD
TD
The true discount on the same sum for double the time is Rs 96.
E-11 The present worth of a bill due 6 months hence is Rs 1,500 and if the bill were due at the end of 2 years, its present worth
would be Rs 1,200. Find the rate per cent and the sum of the bill.
% 11
2
18 %
11
200
, 100
2
11
8 400
2
5
500
year 2 T , year
2
1
month 6 T Since
2
1
100
2 100
1200
1500
100
100
) (
) (
2 1
1
2
2
1

+ +
,
_

+
+

+
+
R
R
R
R
R
R
RT
RT
PW
PW
Using the formula,
1636.30 Rs.
11
12 1500
1500
12
11
2
1
100 11
200
1
1500
100
1
,
_
P
P P
RT
P
PW
The rate per cent is 18
11
2
% per annum and the sum of the bill is Rs 1,636.30.
E-12 If the simple interest on Rs 600 for 5 years be equal to the true discount on Rs 720 for the same time and at the same rate,
find the rate % per annum.
S-12 Since S.I. on Rs. 600 = T.D. on Rs. 720
annum per 4%
5
20
120 100
) 100 (
720
100
600
+
+

R RT
RT
T R T R
E-13 A man borrows a sum of money at 16% per annum simple interest, promising to pay Rs 8,480 after a year from the date of
borrowing. If he wants to discharge the debt by paying four equal quarterly installments, how much should be each
installment?
S-13 Using the formula, (y=4)
Rs.2000
106
84840 25
8480
25
106
2
3 4
4 100
16
4 8480
2
) 1 (
100
+
a a
a
a
n n
y
r a
a n P
EXERCISE
1. Find the present worth and true discount of Rs 9,950 due 3
4
1
years hence at 7
2
1
% per annum simple interest.
[Rs 8,000, Rs 1950]
2. Find the present worth and true discount of Rs 617.50 due 2
2
1
years hence at 7
2
1
% per annum simple interest.
[Rs 520, Rs 97.50]
3. Find the present worth of a bill of Rs 2,160 due 3 years hence at 20% compound interest. Find the true discount also.
[Rs 1,250, Rs 910]
4. The true discount on Rs 1,400 due after a certain time at 10% is Rs 200. Find the time after which it is due.
1
]
1
years
3
5
5. The true discount on a bill 2 years hence at 5% per annum is Rs 120. Find the amount of the bill and its present worth.
[Rs 1,200, Rs 1,320]
6. The true discount on Rs 5,250 due 2 years hence is Rs 250. Find the rate per cent of interest.
1
]
1
annum per %
2
1
2
7. The true discount on bill due 6 months hence at 12% per annum is Rs 36. Find the amount of the bill.
[Rs 636]
8. If T.D and S.I on certain bills are Rs 60 and Rs 62 respectively for a time of 8 months, find the amount of the bill and the
rate per cent.
[Rs 1,860, 5%]
9. If Rs 20 is the true discount on Rs 260 due after a certain time, what will be the true discount on the same sum after half
of the former time, the rate of interest being the same.
[Rs 10.40]
10. The simple interest on true discount of a certain sum due 2 years hence at 4% per annum is Rs 16. Find the sum.
[Rs 2,700]
11. A man purchased a radio for Rs 3,000 and sold it for Rs 3,960 on credit for sometime and still gained 10%. If money be
worth 5%, find the time for which the credit was allowed.
[4 years]
12. An HMT watch was bought for Rs 1,250 and sold at once for Rs 1278 due in 9 months hence. Find the gain or loss per
cent if the rate of interest is 8% per annum. [3..54% gain]
13. Find the present worth of Rs 1,040 in two equal half yearly installments at 8% per annum simple interest.
[Rs 981.48]
SPEED TEST - 16
Paper No. 1 [Time - 5 min.]
1. True discount is the interest calculated on
(a) Principal (b) Amount (c) Sum (d) Present worth
(e) None of these
2. If the sum due is Rs P and true discount is TD, then present worth (PW) is
(a) P + T.D (b) P - T.D. (c) T.D P (d)
D T
P
.
2
(e) P T.D.
3. The difference between simple interest and the true discount is the simple interest on
(a) Sum due (b) Present worth (c) true discount (d) None of these
4. The true discount on a sum, due T years hence at R% per annum is Rs T.D. Then the sum due (P) is given by
(a)
RT
RT
TD
) 100 (
(b)
100
. . T R D T
(c)
T R
D T
. .
(d)
) 100 (
. .
RT
RT D T
+
(e) Data insufficient

5. A borrower has to pay Rs P due T years hence at R% per annum, but if he desires to clear off his debt right now, he has to
pay
(a) Rs P (b)
,
_
+
100
1
RT
P
(c)
) 100 ( RT
P
+
(d) P
T R P
+

100
(e) Data insufficient
6. The difference between simple interest and true discount is equal to
(a) simple interest on true discount
(b)
100
. . T R D T
(c) Always a positive quantity because simple interest is greater than true discount
(d) all of above three
(e) None of these
7. Simple interest is greater than true discount because
(a) Simple interest is on the sum due
(b) True discount is interest on present worth
(c) Present worth is less than the sum due
(d) All the above three
(e) None of these
8. The present worth of Rs 1,404 due in two equal half yearly instalments at 8% per annum simple interest is
(a) Rs 1,404 (b) Rs 1,400 (c) Rs 1,275 (d) Rs 1,325
(e) Rs 1,483
9. If the simple interest on Rs 500 for 3 years equal to the true discount on Rs 600 for the same time and same rate, then the
rate % per annum is
(a) 4% (b) 5% (c) 10% (d) Data insufficient
(c) 8%
10. A Timex watch was bought for Rs 600 and sold the same day for Rs 650.25 at a credit of 9 months and still there was a
gain of 2%. The rate % per annum is
(a) 5% (b) 6% (c) 4
3
2
% (d) 8
3
1
% (e) 6
2
1
%
11. A Leo toy was bought for Rs 195 in cash and sold for Rs 220 at a credit of 1 year. If the rate of interest is 10%, then there
is a
(a) Loss of Rs 5 (b) Gain of Rs 5 (c) Gain of Rs 10 (d) Loss of Rs 20
(e) None of these
12. The simple interest and the true discount on a certain sum for a given time and rate are Rs 45 and Rs 40 respectively.
Then the sum is
(a) Rs 360 (b) Rs 400 (c) Rs 600 (d) Data insufficient
(e) Rs 540
13. The true discount on Rs 550 due after a certain time at 5% is Rs 50. The time after which it is due is
(a) 10 months (b) 2 months (c) 2 years (d) 9 months
(e) None of these
14. The true discount on Rs 1,860 due 10 months hence, is Rs 60. The rate % per annum is
(a) 5
2
1
% (b) 4 % (c) 5% (d) 8
3
1
%
(e) 4
3
1
%
15. If Rs 75 be the true discount on Rs 300 for a certain time, what is the discount on the same sum for double the time, the
rate % being same in both the cases?
(a) Rs 150 (b) Rs 120 (c) Rs 75 (d) Rs 225
(e) Rs l80
16. The true discount of a sum due 2 years hence at 10% per annum is Rs 88. The sum due is
(a) Rs 528 (b) Rs 548 (c) Rs 488 (d) Rs 400
(e) Rs 508
17. The true discount of Rs 2,624, the sum due 8 months is Rs 224. Find the rate % per annum.
(a) 14% (b) 10% (c) 5% (d) 8%
(e) 6%
*****End*****

True Discount (Ch16)

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VISHAL JALAN (THE MATHS GURU) PURE TEACHING, NOTHING ELSE

16.2 IMPORTANT FORMULAE

Where PW1 = present worth of an amount due in T1 years

(k) Installments to pay-off debt

(e) Data insufficient

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