A bill of Rs. 5000 is due in 6 months. What is the bankers' discount at the rate

A bill of Rs. 5000 is due in 6 months. What is the bankers' discount at the rate of 10% per annum?

A bill of Rs. 5000 is due in 6 months. What is the bankers' discount at the rate of 10% per annum?

Correct Answer: Rs. 250

Step 1: Identify the principal amount, which is Rs. 5000.
Step 2: Identify the rate of interest, which is 10% per annum.
Step 3: Identify the time period in years. Since the bill is due in 6 months, convert this to years: 6 months = 0.5 years.
Step 4: Use the formula for Bankers' Discount: Bankers' Discount = (Principal × Rate × Time) / 100.
Step 5: Substitute the values into the formula: Bankers' Discount = (5000 × 10 × 0.5) / 100.
Step 6: Calculate the result: (5000 × 10 × 0.5) = 25000, then divide by 100 to get 250.
Step 7: The Bankers' Discount is Rs. 250.

Bankers' Discount – The bankers' discount is the interest calculated on the face value of a bill for the time period until its maturity, used in financial transactions.
Time Value of Money – Understanding how time affects the value of money, particularly in the context of interest calculations.