A bill of Rs. 20,000 due after 6 months is discounted at a simple bank discount rate of 10% per annum. What is the discount amount?
Correct answer: C. Rs. 1,000
- A. Rs. 500
- B. Rs. 800
- C. Rs. 1,000
- D. Rs. 1,100
Explanation
Bank discount is calculated on the maturity value, using D = Mdt. Hence, D = 20,000 × 0.10 × 0.5 = Rs. 1,000. The proceeds would therefore be Rs. 19,000.
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About Financial Mathematics: Interest, Annuities and Discounting
Financial mathematics covers simple and compound interest, principal, rate, time, accumulated value and present value. It also includes annuities, regular payments, sinking funds, loan repayments and discounting, with a distinction between ordinary annuities and annuities due and between trade discount and mathematical discount.
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