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Bankers Discount Concept

Posted by Ravi Kumar at Friday, June 10, 2011
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i. Suppose a merchant A buys goods worth Rs.10000 from another
merchant B at a credit of say 5 months

ii.Then,B prepares a bill , called the bill of exchange

iii. A signs this bill & allows B to withdraw the amount from his
bank account after exactly 5 months,the date exactly after
5 months is called Nominally due date

iv. Three days (grace days) are added to it get a date known as
legally due date

v.Suppose B wants to have money before legally due date then he
can have the money from banker or a broker who deducts S.I on the
face value (i.e., 10000) for the period from the date on which
the bill was discounted (i.e paied by the banker) & the legally
due date this amount is known as Bankers Discount

vi.Thus , B.D is the S.I on the face for the period from the date
on which the bill was discounted and the legally due date

vii.Bankers Gain (B.G) = (B.D) – (T.D) for the unexpired time

When the date of the bill is not given,grace days are not to be added


(1)B.D = S.I on bill for unexpired time
(2)B.G = (B.D) – (T.D) = S.I on T.D = (T.D)^2 /P.W
(3)T.D = sqrt(P.W * B.G)
(4)B.D = (Amount * Rate * Time)/100
(5)T.D = (Amount * Rate * Time)/(100+(Rate * time)
(6)Amount = (B.D * T.D)/(B.D – T.D)
(7)T.D = (B.G * 100)/(Rate * Time)

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