The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Use original discount questions with clearly stated periods and charge exclusions. Ask separately for the discount and net proceeds, then check that the two sum to face value.
02 / UNDERSTANDING
The concept in context
The amount advanced today is not the same as the amount due at maturity. Day-count conventions, charges and recourse terms can change a real transaction, so numerical practice must state its assumptions. The commercial substance and obligor quality remain important; possession of a bill does not by itself ensure eventual payment.
03 / UNDERSTANDING
A worked learning case
Original educational case. A bill of ₹1,00,000 is discounted for three months at a stated simple annual rate of 12%, ignoring other charges and using a quarter year. Discount is ₹3,000 and proceeds are ₹97,000. The buyer’s maturity obligation remains ₹1,00,000 under the example; the seller receives less because it receives funds earlier.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Original practice: A ₹50,000 bill is discounted for six months at 10% simple annual discount, with no other charges. What are the proceeds?
Show the answer and reasoning
₹47,500.
Use the explicitly stated half-year period: ₹50,000 × 10% × 0.5 gives a discount of ₹2,500. Subtract it from the face value to obtain ₹47,500. The face value is the future bill amount, while proceeds represent the funds provided now under these simplified assumptions.
Two traps to watch for.
- Applying the full annual discount to a six-month period.
- Adding the discount charge to proceeds instead of deducting it.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Convert the discount period into a year fraction.
Write face value, discount and proceeds separately.
State omitted charges and day-count assumptions.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/diploma-banking-finance
For DBF preparation, check the current official notice before relying on changing dates, rules or examination requirements.
