A sum of $1500 is due in 3 years. If the Banker's Discount is $225, what is the

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Question: A sum of $1500 is due in 3 years. If the Banker\'s Discount is $225, what is the rate of interest?

Options:

Correct Answer: 5%

Solution:

Rate = (Banker\'s Discount / (Principal × Time)) × 100 = (225 / (1500 × 3)) × 100 = 5%.

A sum of $1500 is due in 3 years. If the Banker's Discount is $225, what is the rate of interest?

A sum of $1500 is due in 3 years. If the Banker's Discount is $225, what is the rate of interest?

Step 1: Identify the total amount due, which is $1500.
Step 2: Identify the Banker's Discount, which is $225.
Step 3: Identify the time period, which is 3 years.
Step 4: Use the formula for the rate of interest: Rate = (Banker's Discount / (Principal × Time)) × 100.
Step 5: Substitute the values into the formula: Rate = (225 / (1500 × 3)) × 100.
Step 6: Calculate the denominator: 1500 × 3 = 4500.
Step 7: Now calculate the fraction: 225 / 4500.
Step 8: Simplify the fraction: 225 / 4500 = 0.05.
Step 9: Multiply by 100 to get the percentage: 0.05 × 100 = 5%.
Step 10: Conclude that the rate of interest is 5%.

Banker's Discount – The difference between the maturity value of a loan and the present value, calculated using the interest rate over a specific time period.
Rate of Interest Calculation – The formula to calculate the rate of interest based on the Banker's Discount, principal amount, and time.
Time Value of Money – Understanding how money's value changes over time due to interest.