DISCOUNTING

PROMISSORY
NOTE
Rochelle A. Calubong
Objectives:

a. Determine the given data on the problem.

b. Calculate the discount and the proceeds of the
problem.
c. Give the term from the date of the discount to
the maturity date.
Payee: Pedro
_______Tan
Maker: _____________
Lito Lim
May 4, 2023
Origin Date: ____________
Face Value: __________
₱35,000
Simple Interest Rate : ________15%
Term of Note: _______
90 days
Maturity Date: ___________
August 2, 2023
Interest: ___________
₱1,312.50
Maturity Value: __________
₱36,312.50
Payee: _________________
Producers Bank
Maker: _____________
Rico Tan
Origin Date: ____________
May 1, 2022

Face Value: __________

₱58,000
Discount Interest Rate : ____ 12%
Term of Note: _______
90 days
Maturity Date: _____________
July 30, 2023
Interest in Advance: ________₱1,740
Proceeds: __________
₱56,260
Discounting Promissory Note
• The payee of a promissory note who has no immediate need
for the money would probably keep such a note until its
maturity date.
• However, should there be need for cash prior to the maturity
date, the payee can sell the note at a discount to a third
party which maybe financial institution or an individual.
• This discount is the discount interest Id. In such case the third
party is said to have discounted the note.
• The process is referred to as a discounting a promissory note.
• The third party then becomes the owner of the note.
Discounting Promissory Note
• The third party keeps the promissory note until its maturity
date on which the maker pays the third party, the maturity
value and the note.
• The length of time from the date the note is discounted to
the maturity date is the discounted period t.
• The amount of money that the third party pays the original
payee is the loan proceeds Lp.
• This is also referred to as the discounted value of the note on
the date it is discounted by the third party.
Discounting Bank Discount Note
• The formula for discounting a bank discount note are:

I = Fdt and Lp = F - Id
d

or
L = F(1 - dt)
p
Discounting Bank Discount Note
The formula for discounting a bank discount note are:
I = Fdt and L = F - I
d p d

or
L = F(1 - dt)
p

Where, Id = discount interest

F = maturity date
D = discount interest rate
T = discount period
Lp = proceeds
Problems
1. Rose bought office equipment from Ana for which the former
made out a ₱55,000 bank discount note promising to pay the
latter on August 24, 2022. Ana needs money on June 5, 2022 and
sells the note to a financier, who discounts it at 13%. Find Ana’s
proceeds.
2. What was the proceeds on a note for ₱17,900 payable in 5 months
after March 24, 2022 and discounted at a bank on April 5, 2022 at
14%?
3. A 89-day bank discount note for ₱120,000 was written on June
20, 2021. it was discounted on July 4, 2021 at 10%. Find the discount
and discount value.
Problems
1. Rose bought office equipment from Ana for which the former made out a ₱55,000
bank discount note promising to pay the latter on August 24, 2022. Ana needs money
on June 5, 2022 and sells the note to a financier, who discounts it at 13%. Find Ana’s
proceeds.
Given: Find Lp
F = ₱55,000 The discount period t is the time from the date of discount to
d = 13% the maturity date.
The time from June 5, 2022 to August 24, 2022 is 80 days.
Hence , t = 80 days and the discount interest is
80
Id = Fdt = (55,000)(0.13)( ) = ₱1,588.89
360
Problems
1. Rose bought office equipment from Ana for which the former made out a ₱55,000
bank discount note promising to pay the latter on August 24, 2022. Ana needs money
on June 5, 2022 and sells the note to a financier, who discounts it at 13%. Find Ana’s
proceeds.
Given: Find Lp
F = ₱50,000 The discount period t is the time from the date of discount to the maturity date.
d = 13% The time from June 5, 2022 to August 24, 2022 is 80 days. Hence , t = 80 days and the
discount interest is
80
Id = Fdt = (55,000)(0.13)( ) = ₱1,588.89
360

Ana’s proceeds, the amount she receives from the financier

on June 5, 2022 is
Lp = F – Id = 55,00 – 1,588.89 = ₱53,411.11
Note: on August 24, 2022, the financier collects 55,00 from Rose.
Problems
2. What was the proceeds on a note for ₱17,900 payable in 5 months after March 24,
2022 and discounted at a bank on April 5, 2022 at 14%?

Given: Find Lp
F = ₱17,900 From April 5, 2022 to the maturity date is 138.
d = 14% Hence, t = 138 days and the discount interest is
138
Id = Fdt = (17,900)(0.14)( ) = 960.63
360
Problems
2. What was the proceeds on a note for ₱17,900 payable in 5 months after March 24,
2022 and discounted at a bank on April 5, 2022 at 14%?
Given: Find Lp
F = ₱17,900 From April 5, 2022 to the maturity date is 138.
d = 14% Hence, t = 138 days and the discount interest is
138
Id = Fdt = (17,900)(0.14)( ) = ₱960.63
360

The proceeds is
Lp = F – Id = 17,900 – 960.63 = ₱ 16,939.37
Problems
3. A 89-day bank discount note for ₱120,000 was written on June 20, 2021. It was
discounted on July 4, 2021 at 10%. Find the discount, discount value and the maturity
date.

Given: Find Lp
F = ₱120,000 The time from July 4, 2021 to maturity date is 75 days.
d = 10% Hence , t = 75 days and the discount interest is
75
Id = Fdt = (120,000)(0.10)( ) = ₱2500
360
Problems
3. A 89-day bank discount note for ₱120,000 was written on June 20, 2021. it was
discounted on July 4, 2021 at 10%. Find the discount, discount value and the maturity
date.
Given: Find Lp
F = ₱120,000 The time from July 4, 2021 to maturity date is 75 days.
d = 10% Hence , t = 75 days and the discount interest is
75
Id = Fdt = (120,000)(0.10)( ) = ₱2500
360

The discount value is

Lp = F – Id = 120,000 – 2,500 = ₱117,500

and the maturity date is September 17, 2021

How do we find the term in
discounting bank discount note?

How do we solve for the

proceeds on a problem?
Objectives:

a. Determine the given data on the problem.

b. Calculate the discount and the proceeds of the
problem.
c. Give the term from the date of the discount to
the maturity date.
DISCOUNTING SIMPLE INTEREST NOTE
Steps in discounting a simple interest note:
1. Compute the maturity value F of the note using
the formula F=P(1+rt)
2. Find the maturity date of the note
3. Determine the discount period t.
4. Find the proceeds using the formula Lp= F(1-dt).
Problem 1:
Bless Bono holds a ₱16,500, 125-day, 15%
simple interest note made out by Joan More.
The note was made on August 2, 2022. On
Sept. 25, 2022 Bless encashes the note at a
bank at a 16.5% discount rate. How much does
Bless receive from the bank on Sept. 25, 2022?
Bless Bono holds a ₱16,500, 125-day, 15% simple interest note made out by Joan More. The
note was made on August 2, 2022. On Sept. 25, 2022 Bless encashes the note at a bank at
a 16.5% discount rate. How much does Bless receive from the bank on Sept. 25, 2022?

Given: P = 16,500
r = 0.15
t = 125 days
D = 0.165

Analysis: Bless is the payee of the simple interest note made out to him
by Joan. The former then sells the note to a bank at a
discount. The problem asks for Bless proceeds.
1. Bless Bono holds a ₱16,500, 125-day, 15% simple interest note made out by Joan More.
The note was made on August 2, 2022. On Sept. 25, 2022 Bless encashes the note at a bank
at a 16.5% discount rate. How much does Bless receive from the bank on Sept. 25, 2022?

Step 1: The maturity value of a simple interest note is

F=P( 1+rt) =16,500[1+(0.15)(125)] = ₱17,359.38.
360
1. Bless Bono holds a 16,500, 125-day, 15% simple interest note made out by Joan More. The
note was made on August 2, 2022. On Sept. 25, 2022 Bless encashes the note at a bank at
a 16.5% discount rate. How much does Bless receive from the bank on Sept. 25, 2022?

Step 1: The maturity value of a simple interest note is

125
F=P( 1+rt) =16,500[1+(0.15)(360)] = ₱17,359.38.

Step 2: the maturity date is on December 5, 2022 (125 days after August 2, 2022)
Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: September 25, 2022
Maturity date: December 5, 2022
Therefore, t=71 days
1. Bless Bono holds a 16,500, 125-day, 15% simple interest note made out by Joan More. The
note was made on August 2, 2022. On Sept. 25, 2022 Bless encashes the note at a bank at
a 16.5% discount rate. How much does Bless receive from the bank on Sept. 25, 2022?

Step 1: The maturity value of a simple interest note is Step 2: The maturity date is on December 5, 2022 (125 days after
125
F=P( 1+rt) =16,500[1+(0.15)(360)] =₱17,359.38. August 2, 2022)

Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: September 25, 2022
Maturity date: December 5, 2022
Therefore, t=71 days
Step 4: Compute the proceeds.
71
Lp= F(1-dt) = 17,359.38[1-(0.165)( )] = ₱16,794.47
360
Problem 2:
An 18%, ₱29,000 simple interest note of 90-
day term was made on April 30, 2022. It was
discounted on May 28, 2022 at 13.5% interest
rate in advance. Find the proceeds of the note.
2. An 18%, ₱29,000 simple interest note of 90-day term was made on April 30, 2022. It was
discounted on May 28, 2022 at 13.5% interest rate in advance. Find the proceeds of the
note.

Given: P = 29,000
r = 0.18
t = 90 days
d = 0.135
2. An 18%, ₱29,000 simple interest note of 90-day term was made on April 30, 2022. It was
discounted on May 28, 2022 at 13.5% interest rate in advance. Find the proceeds of the
note.

Step 1: The maturity value of a simple interest note is

F=P( 1+rt) =29,000[1+(0.18)( 90 )] = 30,305
360
2. An 18%, ₱29,000 simple interest note of 90-day term was made on April 30, 2022. It was
discounted on May 28, 2022 at 13.5% interest rate in advance. Find the proceeds of the
note.

Step 1: The maturity value of a simple interest note is

90
F=P( 1+rt) =29,000[1+(0.18)( )] = 30,305
360

Step 2: the maturity date is on July 29, 2022 (90 days after April 30, 2022)
Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: May 28, 2022
Maturity date: July 29, 2022
Therefore, t=62 days
2. An 18%, ₱29,000 simple interest note of 90-day term was made on April 30, 2022. It was
discounted on May 28, 2022 at 13.5% interest rate in advance. Find the proceeds of the
note.

Step 1: The maturity value of a simple interest note is is Step 2: The maturity date is on July 29, 2022 (90 days after April 30,
90
F=P( 1+rt) =29,000[1+(0.18)( )] = 30,305 2022)
360
Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: May 28, 2022
Maturity date: July 29, 2022
Therefore, t=62 days
Step 4: Compute the proceeds.
62
Lp= F(1-dt) = 30,305 [1-(0.135)( )] = 29,600.41
360
Problem 3:
Jim made a simple interest on March 17, 2023
for ₱66,900 with a promise to pay Pert after
200 days at 14% interest. Pert had the note
discounted at a bank on May 3, 2023 at 16%.
Find the proceeds of the note.
Jim made a simple interest on March 17, 2023 for ₱66,900 with a promise to pay Pert after
200 days at 14% interest. Pert had the note discounted at a bank on May 3, 2023 at 16%.
Find the proceeds of the note.

Given: P = 66,900
r = 0.14
t = 200 days
d = 0.16
Jim made a simple interest on March 17, 2023 for ₱66,900 with a promise to pay Pert after
200 days at 14% interest. Pert had the note discounted at a bank on May 3, 2023 at 16%.
Find the proceeds of the note.

Step 1: The maturity value of a simple interest note is

F=P( 1+rt) =66,900[1+(0.14)(200)] = 72,103.33
360
Jim made a simple interest on March 17, 2023 for ₱66,900 with a promise to pay Pert after
200 days at 14% interest. Pert had the note discounted at a bank on May 3, 2023 at 16%.
Find the proceeds of the note.

Step 1: The maturity value of a simple interest note is

200
F=P( 1+rt) =66,900[1+(0.14)( )] = 72,103.33
360

Step 2: the maturity date is on October 3, 2023 (200 days after Mar 17, 2023
Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: Mar 17, 2023
Maturity date: May 3, 2023
Therefore, t = 153 days
Jim made a simple interest on March 17, 2023 for ₱66,900 with a promise to pay Pert after
200 days at 14% interest. Pert had the note discounted at a bank on May 3, 2023 at 16%.
Find the proceeds of the note.

Step 1: The maturity value of a simple interest note is is Step 2: The maturity date is on October 3, 2023 (200 days after Mar
200
F=P( 1+rt) =66,900[1+(0.14)( )] = 72,103.33 17, 2023
360

Step 3: The discount period is the time from the date of discount to the maturity date.
Date of discount: Mar 17, 2023
Maturity date: May 3, 2023
Therefore, t = 153 days
Step 4: Compute the proceeds.
153
Lp= F(1-dt) = 72,103.33 [1-(0.16)( )] = 67,200.30
360
What are the steps in discounting a simple interest note?
a. Compute the maturity value F of the note using the formula F=P(1+rt)

b. Find the maturity date of the note

c. Determine the discount period t.

d. Find the proceeds using the formula Lp= F(1-dt).

What is the other term for loan proceeds?

Discount Value