Definition of Terms

Simple Discount
 Annual discount rate in percentage (%) Vc: present value,
is the discounted amount to pay in advance of the original
maturity date (valore attuale commerciale) Simple
Discount - Period of time is a fraction of the year. The
Simple Discount formula applies to short-term
investments (less than a year).
Difference of simple discount and
simple interest
 A basic difference between the two types of notes is that
simple interest is calculated based on principal, whereas
simple discount is calculated based on maturity value, as
shown in the table. College students sometimes borrow
money from the government using Stafford loans, which
are simple discount notes.
FutureValue
 Future value (FV) is the value of a current asset at a
specified date in the future based on an assumed rate of
growth. If, based on a guaranteed growth rate, a $10,000
investment made today will be worth $100,000 in 20
years, then the FV of the $10,000 investment is $100,000.
Amount Due

 The total sum of money due for the purchase of a good or

service that must be paid by the set due date. In relation to
taxes, the money owed to the government when required
tax amount totals a greater number than total tax payments
previously made.
Maturity Value
 Maturity value is the amount payable to an investor at the
end of a debt instrument's holding period (maturity date).
For most bonds, the maturity value is the face amount of
the bond. For some certificates of deposit (CD) and other
investments, all of the interest is paid at maturity.
Discount Rate (r)
 The discount rate is the interest rate charged to
commercial banks and other depository institutions for
loans received from the Federal Reserve's discount
window. The discount rate also refers to the interest rate
used in discounted cash flow analysis to determine the
present value of future cash flows.
Discount Time (t)
 Business Mathematics plays an important role in
commercial enterprises for understanding and handling
everyday operations. Commercial enterprises use Math in
probability, accounting, statistics, elementary algebra,
sales forecasting, inventory management, financial
analysis and marketing
Discount (D)
 In finance, discount refers to a situation when
a bond is trading for lower than its par or face
value. The discount equals the difference
between the price paid for a security and the
security's par value.
Principal/Present Value (P)
 Present value (PV) is the current value of a future sum of money or
stream of cash flows given a specified rate of return. Future cash
flows are discounted at the discount rate, and the higher the discount
rate, the lower the present value of the future cash flows.
Determining the appropriate discount rate is the key to properly
valuing future cash flows, whether they be earnings or obligations
Bank Discount (B)
 The bank discount rate is the interest rate for short-term
money-market instruments like commercial paper and
Treasury bills. The bank discount rate is based on the
instrument's par value and the amount of the discount.

The bank discount rate is the required rate of return of a

safe investment guaranteed by the bank
Computation Involving
Simple Discount:
Simple Discount
Difference of simple discount and simple
interest
FutureValue
Amount Due
Maturity Value
Discount Rate
Principal/Present Value (P)
Bank Discount