Question

Find the true discount and the banker's discount on a bill
whose present value is Rs.10,000 and which is legally due 4 months hence at 10%
p.a. What are its face value and cash value? How much is the banker's gain?​

Answer 1

Answer:

Suppose that a trader purchases the goods worth Rs. 500 from another trader. The credit given here by trader A to B is 4 months. Thus, B prepares a bill known as the bill of exchange or more commonly as Hundi. So, when the goods are received, A agrees on the exchange by signing a document that allows B to withdraw the amount from A’s account as soon as 4 are over from the date of purchase. This date which is exactly after 4 months after the time period is called as the nominally due date. These concepts are very useful when you are solving the questions of bankers discount.