A bill of Rs. 4000 is due in 2 months. What is the Banker's Discount at the rate of 5% per annum?
Correct Answer: Rs. 33.33
- Step 1: Identify the total amount of the bill, which is Rs. 4000.
- Step 2: Identify the rate of interest, which is 5% per annum.
- Step 3: Identify the time period until the bill is due, which is 2 months.
- Step 4: Convert the time period from months to years. Since there are 12 months in a year, 2 months is equal to 2/12 years.
- Step 5: Calculate the Banker's Discount using the formula: Banker's Discount = (Principal Amount * Rate * Time) / 100.
- Step 6: Substitute the values into the formula: Banker's Discount = (4000 * 5 * (2/12)) / 100.
- Step 7: Simplify the calculation: First, calculate (2/12) which equals 1/6.
- Step 8: Now calculate: Banker's Discount = (4000 * 5 * (1/6)) / 100.
- Step 9: Calculate 4000 * 5 = 20000.
- Step 10: Now divide 20000 by 6 to get approximately 3333.33.
- Step 11: Finally, divide 3333.33 by 100 to get Rs. 33.33.
- 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 interest rates affect the present value of future cash flows.
