A trader owes a merchant Rs. 901 due 1 year's hence. However, the trader wants to settle the account after 3 months. How much cash should he pay, If rate of interest is 8% per annum?

Rs. 870
Rs. 850
Rs. 828.92
Rs. 846.94

Correct Answer: Rs. 850

Explanation:

P.W. of Rs. 901 due 9 months hence at 8%
= Rs { (100 x 901) / (100 + (8 x 3 / 4))} = Rs. (100 x 901) / 106
= Rs. 850

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