Bank Discount...

what is it??? does bank discount exist??? of course!! let's take a look...

D=Sdt

D=bank discount

S=amount of maturity value

d=discount rate

t =term of discount in years

P=S-D

P=S-Sdt

P=S(1-dt)

My father borrows RM9000 for four months from a bank that charges a discount rate of 10%.So, in calculating the bank discount the proceeds,I used this formula:

S=RM9000

d=10%

t=0.33 years

From D=Sdt,I get

bank discount=9000x0.1x0.33

=RM297

From P=S-D,I get

proceeds=9000-297

=RM8703