5442.18
Rs.100/- will become Rs.105/- in one year and 110.25 in 2 years under continuous discounting. So 100 / 110.25 X 6000 will be Rs.5442.18
Dear rvm,
It's incorrect. The question asks for continuous discounting. Continuous Discounting means that their would be continuous compounding of the money; ie; every second, every milli-second, every mili-milli-second, etc. Whereas, what you have done is Annual Compounding. I hope you get the point.
So, in mathematics, we use the Concept of "e" (Exponentiation), to calculate the value under Continuous Compounding.
So, the answer to this question would be:
= 6000/[(e^0.05)^2]
= 6000/[1.05127^2] .......... (The value of e^0.05 is 1.05127, it must be supplied in the question)
= 5429.04