In a business dealing, A owes B ₹ 20,000 payable after 5 years, whereas B owes A ₹ 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?
- A. Both are at par
- B. B gives ₹ 6,000 to A
- C. A gives ₹ 6,000 to B ✓
- D. A gives ₹ 4,000 to B
Correct Answer: C. A gives ₹ 6,000 to B
Explanation
Present Worth = \frac{\text{Amount}}{1 + \frac{RT}{100}}. A's debt present value = \frac{20000}{1 + (5 \times 5)/100} = 16000. B's debt present value = \frac{12000}{1 + (5 \times 4)/100} = 10000. Net settlement = 16000 - 10000 = 6000 owed by A to B.
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