Bank Discount.

28 Oct 2023

How to become a Lightning Calculator by Anonymous is part of the HackerNoon Books Series. You can jump to any chapter in this book here. Bank Discount.

Bank Discount.

The sum charged by a bank for cashing a note or time draft is called bank discount. This discount is the simple interest, paid in advance, for the number of days the note has to run. Wholesale business houses usually sell goods on time and take notes from the retailers in payment. These notes are not often for a longer period than three months. Some are placed in the banks for collection, others are discounted. When a note is discounted at a bank the payee endorses it, making it payable to the bank. Both maker and payee are then responsible to the bank for its payment. If the note is drawing interest the discount is reckoned on and deducted from the amount due at maturity. Most notes discounted at banks do not draw interest. The time in bank discount is always the number of days from the date of discounting to the date of maturity.

Example. A note of $250, dated July 7th, payable in 60 days, is discounted July 7th, at 6 per cent.; find the proceeds.

This note is due in 63 days, or September 8th. The accurate interest of $250 for 63 days at 6 per cent. is $2.59. The proceeds, then, will be $250 - $2.59, or $247.41.

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