Business Mathematics and Statistics · Class 11 Commerce

Ch 6Discounting of Bills of Exchange — Class 11 Business Mathematics and Statistics, concept-first.

A bill of exchange is a written, unconditional order signed by one person directing another person to pay a stated sum of money to a named party, either on demand or at a fixed future date.

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Banker's Gain

The banker's gain is the excess of banker's discount over true discount, . It equals the simple interest on the true discount, and also . Useful reversals: , , and .

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Chapter contents

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Bills of Exchange — Concept and Features

A bill of exchange is a written, unconditional order signed by one person directing another person to pay a stated sum of money to a named party, either on demand or at a fixed future date.

Important Terms — Demand Bill, Time Bill, Days of Grace, Due Date

Before any discounting can be calculated, the exact date on which the bill must be paid has to be fixed.

Banker's Discount and Discounted Value (Proceeds)

When a banker discounts a bill, the charge deducted is called the banker's discount (BD). It is simply the simple interest on the face value of the bill, calculated for the unexpired period at the agr…

True Discount and Present Value

The present value (PV) of a bill is the amount which, if lent out today at the given rate of simple interest, would grow to exactly the face value by the maturity date.

Banker's Gain and Formula Relationships

The banker's gain (BG) is the extra amount the banker makes by charging discount on the full face value instead of on the present value.

Exercises

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