A bill of Rs. 5000 is due in 3 months. What is the Banker's Discount at the rate

A bill of Rs. 5000 is due in 3 months. What is the Banker's Discount at the rate of 10% per annum?

A bill of Rs. 5000 is due in 3 months. What is the Banker's Discount at the rate of 10% per annum?

Correct Answer: Rs. 125

Step 1: Identify the face value of the bill, which is Rs. 5000.
Step 2: Identify the rate of interest, which is 10% per annum.
Step 3: Identify the time period until the bill is due, which is 3 months.
Step 4: Convert the time period from months to years. Since there are 12 months in a year, 3 months is equal to 3/12 years.
Step 5: Use the formula for Banker's Discount: Banker's Discount = (Face Value * Rate * Time) / 100.
Step 6: Substitute the values into the formula: Banker's Discount = (5000 * 10 * (3/12)) / 100.
Step 7: Calculate the value: First, calculate (3/12) which equals 0.25. Then, multiply: 5000 * 10 * 0.25 = 12500.
Step 8: Finally, divide by 100: 12500 / 100 = Rs. 125.

Banker's Discount – The Banker's Discount is the interest calculated on the face value of a bill for the time period until its maturity.
Time Value of Money – Understanding how time affects the value of money, particularly in the context of interest calculations.
Interest Rate Calculation – Applying the correct formula to calculate interest based on the principal amount, rate, and time.