A sum of $5000 is borrowed for 2 years at a Banker's Discount of $400. What is t

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Question: A sum of $5000 is borrowed for 2 years at a Banker\'s Discount of $400. What is the rate of interest?

Options:

Correct Answer: 5%

Solution:

Rate = (Banker\'s Discount / (Principal × Time)) × 100 = (400 / (5000 × 2)) × 100 = 4%.

A sum of $5000 is borrowed for 2 years at a Banker's Discount of $400. What is the rate of interest?

A sum of $5000 is borrowed for 2 years at a Banker's Discount of $400. What is the rate of interest?

Step 1: Identify the values given in the problem. The principal amount borrowed is $5000, the time period is 2 years, and the Banker's Discount is $400.
Step 2: Understand the formula to find the rate of interest. The formula is: Rate = (Banker's Discount / (Principal × Time)) × 100.
Step 3: Substitute the values into the formula. Replace Banker's Discount with 400, Principal with 5000, and Time with 2.
Step 4: Calculate the denominator (Principal × Time). This is 5000 × 2 = 10000.
Step 5: Now, divide the Banker's Discount by the result from Step 4. This is 400 / 10000.
Step 6: Calculate the result from Step 5. This equals 0.04.
Step 7: Multiply the result from Step 6 by 100 to convert it to a percentage. This is 0.04 × 100 = 4%.
Step 8: Conclude that the rate of interest is 4%.

Banker's Discount – Banker's Discount is the interest deducted in advance on a loan, calculated on the principal amount for the entire loan period.
Rate of Interest Calculation – The rate of interest is calculated using the formula involving the Banker's Discount, principal, and time.