BANK DISCOUNT

BANK DISCOUNT is interest on a loan, deducted in advance from the face value of the note.

The formula is D=Sdt
where D = bank discount
S = amount of maturity value
d = discount rate
t = term of discount in years

The proceeds: Bank proceeds = maturity value - bank discount or P = S ( 1 - dt )

Example:
Aisha borrows RM8000 for three months from a lender who charges a discount rate of 10%. Find...
a) the discount
b ) the proceeds

Solution:

S = RM8000
d = 10%
t = 0.25 year

a) From D = Sdt, we get
discount = 8000 x 0.1 x 0.25
= RM 200

b) From P = S- D
proceeds = 8000 - 200
= RM7800

At first i thought this topic is easy... But after TEST 2 that day.. Arghhh! It's So DifFicult.. Miss Ch'ng! I could not answer your question... He He.. i will try harder for final exam... gambatte kudasai!