Present worth under compound interest: A bill of ₹1764 is due in 2 years. If money is worth 5% compounded annually, what is the present worth today?

Introduction / Context: Present worth (PW) under compound interest discounts a future amount back to today using the compound factor. This is a standard time value of money computation in finance and aptitude tests.

Given Data / Assumptions:

• Future amount (face value) A = ₹1764.
• Rate r = 5% per annum, compounded annually.
• Time n = 2 years.

Concept / Approach: For compound interest, PW = A / (1 + r)^n. Substitute r = 0.05 and n = 2 to compute the exact present worth. Since 1.05^2 = 1.1025, division is straightforward here and yields an integer result.

Step-by-Step Solution:

Verification / Alternative check: Forward check: Invest ₹1600 at 5% for 2 years → 1600 * 1.1025 = ₹1764, matching the due amount.

Why Other Options Are Wrong: ₹1650, ₹1700, ₹1714, ₹1620 do not compound exactly to ₹1764 in 2 years at 5%.

Common Pitfalls: Using simple interest instead of compound, or rounding prematurely when the values here are exact.

Final Answer: ₹1600