Calculating Bank Discounts and Proceeds

Another way of lending money is to deduct the interest from the principal at the beginning of the loan and give the borrower the difference. These are known as simple discount notes. When this method is used, the amount of interest charged is known as the bank discount and the amount that the borrower receives is known as the proceeds.

When the term of the note is over, the borrower will repay the entire principal, or face value, of the note as the maturity value.

[DavidEaton]

Literally perfect: simple, short, and it's correct. Thank you!

[daniellowery]

Thanks. I'm studying for FBLA and this was helpful.

[Icedkoffi]

The explanation here is soo simple thank you very much <3

[charlesisaac]

What if theres no date for the bank discount?

[aprilaineleeaparre]

Kindly explain please .. because im so confused ..

[adriennefallorina]

Calculate the amount borrowed in a lending company with discount of P630 at annual interest rate of 4.2% paid in 9mos.

[aprilaineleeaparre]

I calculate the 7, 000 × .7 × 270/360 = 3, 675.00 .. but why is that your computation is only 367.50 ??