A bill of Rs. 1,000 drawn on 7th May, 2011 for six months was discounted on 29th August, 2011 for cash payment of Rs. 988. Find the rate of interest charged by the bank.

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Solution

Bill drawn on : 07.05.2011
Tenure : 06 Months
Nominal due date : 07.11.2011
Legally due date : 10.11.2011
Discounted on : 29.08.2011
Unexpired Number of days
August : 02 days
September : 30 days
October : 31 days
November : 10 days
-------------------------------
Total = 73 days
$∴ n = \frac{73}{365} y e a r = \frac{1}{5} y e a r$
Now, Banker's discount, B.D. = Face value - Amount realised
= Rs. 1000 - Rs. 988 = Rs. 12
Using, B.D. $= A \times n \times i$ , we get
$12 = 1000 \times \frac{1}{5} \times \frac{r}{100} \Rightarrow r = \frac{12 \times 5 \times 100}{1000} = 6$ %
Hence, the required rate of Interest is 6% per annum.

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PRACTICAL PROBLEMS

Journalise the following bill transactions as on 31^st July, 2011 in the books of Pratapsing.

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C. Jethabhai honoured his acceptance of Rs 9,800 which was deposited into bank for collection and bank debited Rs 80 for bank charges.

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