Question: A sum of $1500 is due in 5 years. If the Banker\'s Discount is $300, what is the rate of interest?
Options:
4%
5%
6%
3%
Correct Answer: 5%
Solution:
Banker\'s Discount = Principal x Rate x Time; 300 = 1500 x Rate x 5; Rate = 4%.
A sum of $1500 is due in 5 years. If the Banker's Discount is $300, what is the
Practice Questions
Q1
A sum of $1500 is due in 5 years. If the Banker's Discount is $300, what is the rate of interest?
4%
5%
6%
3%
Questions & Step-by-Step Solutions
A sum of $1500 is due in 5 years. If the Banker's Discount is $300, what is the rate of interest?
Step 1: Identify the total amount due in the future, which is $1500.
Step 2: Identify the Banker's Discount, which is $300.
Step 3: Understand that the Banker's Discount formula is: Banker's Discount = Principal x Rate x Time.
Step 4: In this case, the Principal is $1500, the Banker's Discount is $300, and the Time is 5 years.
Step 5: Substitute the known values into the formula: 300 = 1500 x Rate x 5.
Step 6: Simplify the equation: 300 = 7500 x Rate (because 1500 x 5 = 7500).
Step 7: To find the Rate, divide both sides of the equation by 7500: Rate = 300 / 7500.
Step 8: Calculate the Rate: Rate = 0.04.
Step 9: Convert the decimal to a percentage: Rate = 0.04 x 100 = 4%.
Banker's Discount – The Banker's Discount is the interest deducted in advance on a loan or sum due, calculated using the formula: Banker's Discount = Principal x Rate x Time.
Interest Rate Calculation – The process of determining the rate of interest from the Banker's Discount formula, which involves rearranging the formula to solve for the rate.
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