Banker's Discount

Introduction
As discussed in the chapter of "True Discount", i f
the borrower returns the loan before the due date, he has to
pay slightly less money than the amount due. This less money
is the benefit given to the borrower for earlier repayment and
is known as True Discount. In fact true discount is the"in-
terest calculated on the Present Worth of the Due Amount
for due periodfrom right new ".
But, suppose thedebtor (who has taken the loan) is
not able to clear the loan before it is due, but thecreditor
(who has given the loan) requires money, he has no right to
ask the debtor to pay back before thebill is due. Theonly
way the creditor can raise money is to go to a bank and
encash thebill. During encashment of thebill, the bank will
charge a simple interest on the amount mentioned in thebill
for the unexpired time.
Now look at someimportant terms that are frequently
used in this chapter.
1. Face value:
The amount mentionedin thebill is calledface value.
2. Banker's Discount: (B.D.)
It is the simple interest on the amount mentioned in
thebill (or face value) for the period fromthe date on which
thebill was encashed and thelegally due date.
"Banker's Discount is slightly more than True Dis-
count '
3. Banker's Gain (B.G.):
The difference between Banker's Discount (B.D) and
True Discount (TD) is known as Banker's Gain.
Note: 1. Banker's Discount, True Discount and Banker's Gain
are on the unexpired (unutilised) timeof thebill and
face value (or actual amount) of thebill.
2. In Arithmetic 'Discount' always means 'TrueDis-
count' unless Banker's Discount is expressly meant.
Banker's Discount is generally denoted by BD.
Important Results
(i) Banker's Discount (BD) =Simple interest onbill for
its unexpired time
Bill amount (A ) x Rate(R) x Unexpired Time(T)
100
(ii) Banker's Gain (BG) =Simple interest on True Dis-
T.DxRxT
count(TD)= 1 Q ( )
=Banker's Discount (B.D) - True Discount (TD.)
(iif) True Discount (TD.) =Bill Amount (A ) - Present
Worth (PW)
=Simple Interest on Present Worth (PW)
PWxRxT
100
Rule 1
To find the Banker's Discount when Bill Amount (A), Time
(T) and Rate (R) are given.
A xRxT
Banker's Discount =
100
Illustrative Example
EK Find the banker's discount on abill of Rs 2550 due 4
months hence and 6% per annum.
Soln: Applying the aboveformula, we have
2550x6x4
Banker's Discount = . . .
100x12
=Rs 51
Exercise
1. The true discount on abill of Rs 1860 due after 8 months
is Rs 60. Find the banker's discount.
a)Rs62 b)Rs52 c)Rs60 d) Noneof these
2. Find the banker's discount on abill of Rs 12750 due 2
months hence and 3% per annum.
a) Rs 63.75 b)Rs61.75 c)Rs 64.75 d)Rs 63.25
3. The true discount on abill of Rs 3720 due after 4 months
is Rs 120. Find the banker's discount.
a)Rsl22 b)Rsl34 c) 124 d) Noneof these
Answers
1. a; Hint: Amount =Rs 1860; True Discount * Rs 60
Present Worth =Rs 1860 - Rs 60 - Rs 1800
716
PRACTICE BOOK ON QUICKER MATHS
SI on Rs 1800 for 8 months =Rs 60
Rate =
100x60
1800x
% =5%
1860x5x-
2. a
Banker's Discount =
3.c
100
-2- =RS 62
Rule 2
To find the Banker's Gain (BG) when Bill Amount (A), rime
(T) and Rate (R) are given.
A(RT)2
(I) Banker's Gain = 1 f t f t / l f t n , D T N or,
(TD)'
100(100 +RT) PW '
where TD = True Discount, PW = Present Worth
AxRxT
(11) True Discount (TD) =
100 +RT
Illustrative Example
Ex: Find the banker's gain on abil l of Rs 2550 due4 months
hence at 6% per annum.
Soln: Applying the aboveformula, we have
2550x 6x
Banker's Gain=
100 100+ 6x
2550x4
100x102
=Rel .
Note: Banker's Gain =BD - TD [iei f you calculateTD, you
can find the Banker's Gain by subtracting TD from
BD.
Exercise
1. The true discount on abil l of Rs 1860 due after 8 months
is Rs 60. Find the banker's gain.
a)Rsl .5 b)Rs2.5 c)Rs4 d)Rs2
2. Find the banker's gain on abil l of Rs 6900 due 3 years
hence at 5% per annumsimple interest.
a)Rsl 35 b)Rsl 25 _c)Rsl 85 d)Rsl 45
3. The true disocunt on abil l of Rs 540 is Rs 90. The banker's
discount is:
a)Rs60 b)Rsl 50 c)Rsl 08 d)Rsl l 0
4. The present worth of a certainbil l due sometime hence
is Rs 800 and the true discount is Rs 36. Then, the banker's
discount is:
a)Rs37 b)Rs 34.38 c)Rs 37:62 d)Rs 38.98
5. Find the difference between the banker's discount and
the true discount on Rs 8100 for 3 months at 5%.
a)Rs0.125 b)Rsl .25 c)Rs!2.5 d) Noneof these
Answers
1. d; Hint: Present Worth =Rs 1860 - Rs 60 =Rs 1800
\
BG =
(TD)Z 60x60
Present Worth 1800
=Rs2
2. a
3. c; Hint: Present Worth =540 - 90 =Rs 450
90x90
Banker's Gain = =Rs 18
450
.-. Banker's discount =90 +18 =Rs 108 [SeeNote].
4. c; Hint: BG =
(TD) 36x36
=Rsl .62.
PW ^ 800
.-. BD =TD +BG =Rs36 +Rsl .62 =Rs37.62
5. b; Hint: Difference between the banker's discount and the
true discount =Banker's gain.
required answer =
8100x5x- x5xl
4 4
100 100 +5x
Rs 1.25.
Rule 3
To find the face value (or bill amount) when Banker's Dis-
count (BD) and Time (T) are given.
I OOX BD
Face value (A) =
RxT
Illustrative Example
Ex: I f theB. D on abil l at 4% per annumis Rs 60, find the
face valueof 6 monthsbil l .
Soln: Appl ying the aboveformula, we have
Face value =
100x60
Rs3000
4x-
12
Exercise
1. I f the B.D on abil l at 8% per annumis Rs 120, find the
face value of 1 year bil l .
a) Rs 3000 b) Rs 750
c)Rsl 500 d)Rs2250
2. I f the B.D on abil l at 5% per annumis Rs 135, find the
face valueof 9 monthsbil l .
a)Rs3600 b)Rs3650
c)Rs2750 d)Rs3250
3. I f theB.D on abil l at 6% per annumis Rs 63, find the face
valueof 3 monthsbil l .
a)Rs415<) b)Rs4200
c)Rs4250 d) None of these
Answers
!.c 2.'a 3.b
722 PRACTICE BOOK ON QUICKER MATHS
c) Rs5599 d) Noneof these
A banker paidRs5767.50for abil l of Rs5840, drawnon
April 4, at6months. Onwhatday wasthebil l discounted,
therateof interestbeing7%?
a) 3rdAug b) 4thAug c) 3rd Sep d) 3rd J ul
Thebanker's discountonasumof money for \ years
is Rs60andthetruediscount onthesamesumfor 2
yearsisRs75. Therateper centis:
a) 5% b) 6%
,2
c) 6 - 0 / 0
1
d) 3-o/0
3-
A bil l isdiscountedat 5%per annum. I f banker's dis-
count beallowed, at what rateper cent must thepro-
ceedsbeinvested, sothat nothingmay belost?
a) 5% b)4Yi% b)5]|%
d) 10%
8. Theinterestonacertainsumof money isRs67.20and
thediscount onthesamesumof money for thesame
timeandatthesamerateisRs60. Whatisthesum?
a)Rs560 b)Rs480 c)Rs590 d)Rs860
Answers
l .a; Hint: Let theamountof bil l beRs100.
Money deducted=Rs4
Money receivedby holder of thebil l
=Rs(100-4) =Rs96
SI onRs96for 10months=Rs4
Rate:
100x4x6
96x5
=5%.
2. Hint: Dateonwhichthebil l wasdrawn
=March8that7 months.
Nominally duedate=Oct8th.
Legally duedateOct, 11th.
Dateonwhichthebil l wasdiscounted=May, 18th.
Timefor Whichthebil l hasyettorun
May J uneJ uly Aug Sep Oct
13+30+31+31+30+11=146days=- years.
Now (i) d; Banker'sgain=SI onTD
i.e., Rs3isSI onTD for yearsat5%
100x3
2 =
5
(ii)a;BD =TD +SI onTD
. TD =Rs 5 x =Rsl 50
5
Rs150+SI onRs150for ~yearsat5%
. . . 2 5
;Rsl 50+Rs1 5 0 x y x ^ =Rsl 53.
(iii) a; Sum!
BDxTD 153x150
=Rs7650.
BD-TD 153-150
3. a; Hint: Clearly, SI onRs17850at5%isRs357.
(100x357
T i m e = 17850^5
146days.
So, thebil l is146daysprior to24thmay, thelegally due
date.
May April MarchFeb J an Dec
24+ 30+ 31+ 28+31+2=146days.
So, thebil l wasdiscountedonDec 29,1990.
4. Hint: (i) a; Facevalueof thebil l =Rs5656
Dateonwhichthebil l wasdrawn=J uly, 14that5 months.
Nominally duedate=December, 14 th
Legally duedate=December, 17th.
Dateonwhichthebil l wasdiscounted=October, 5th
Periodfor whichthebil l hasyettorun
Oct Nov Dec
1
26+30+17 =73daysor year
.-. BD =SI onRs5656fpr - yearsat5%
=Rs
^5656x1x5^
100x5
=Rs56.56
(ii)c;TD =Rs '
5656x5x
5
100+ 5x
Rs56
(iii) c; BG =BD - TD =56paise
(iv) b; Money receivedby theholderof thebil l
=Rs(5656- 56.56) =Rs5599.44.
5. a; Hint: BD =Rs(5840- 5767.20) =Rs72.80
.-. Rs72.80isSI onRs5840at7%
100x72.80 13
So, unexpiredtime= _ ,_ = years=65days.
7x5840 73
Now, dateof drawof bil l =April , 4at6months.
Nominally duedate=October, 4
Legally duedate=October, 7
So, wemustgoback 65daysfromOctober, 7
Oct Sept Aug =7 +30+28
i.e., Thebil l wasdiscountedon3rdAugust.
6. d; Hint: BD for(3/2) years=Rs60
f60x2 , 1
BDfor2years=Rs I x 2 =Rs80
Banker's Discount 723
Now, BD =Rs 80 : TD =Rs 75 and Time =2 years.
( 80x75"!
.-. Sum=Rsl ;j =Rsl 200
.-. Rs 80 is SI on Rs 1200 for 2 years.
100x80\
3
So, rate:
% =3-o/0
,1200x2,
7. c; Hint: Let the sumbe Rs 100. Then, BD =Rs 5.
Proceeds =Rs (100 - 5) =Rs 95
.-. Rs 5 must be the interest on Rs 95 for 1 year.
e 100x5"
So, rate=
95x1 = V/ o -
8. a; Hint: Interest on Sum - True Discount = Interest on True
Discount
[ The difference between the simple interest and the
true discount on a sum of money is equal to the simple
interest on the true discount for the given time at the
given rate per cent.
Proof: Sum = PW + TD
.. Interest on sum = Int on PW + Int on TD = TD + Int
onTD
Interest on sum - TD = Int on TD or, Banker's gain =
IntonTDj
In the given question, we have
Rs 67.20 - Rs 60 =Int on Rs 60
Rs 7
1
Re1 =Int on Rs
Int on Rs 60
60
1
Rs 67- =I ntonRs r x67-
5 1 5
5
.-. the required sum=Rs ~- x 67 =Rs 560.
7 5
5