A owes B Rs. 456.75 payable 4 1/ 2 months hence and B owes A Rs. 455.51 payable 3 months hence. If they agree to settle their account by a ready money payment. What sum should be paid over and to whom reckoning the rate of true discount at 4 per cent per annum?

Re.1`,A
Rs. 2,B
Rs. 2,A
Re. 1, B

Correct Answer: Re.1`,A

Explanation:

Time = 4¹/₂ months = 3/8 year,
Rate = 4 percent
∴ Amount of Rs. 100 = 203/2
∴ P.W. = Rs. 456.75 / (203/2) x 100 = Rs. 450
Again, time = 3 months = 1/4 year, rate = 4 percent
P.W. = Rs. 455.51 x 100 x 101 = Rs. 451
Hence the required sum to be paid to A = Rs. 451 - Rs. 450 = Re. 1

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