Question

Discuss the meaning of "discounting bills of exchange".

Answer 1

A bill of exchange is a document acknowledging an amount of money owed in consideration of goods received. It is a paper signed by the debtor and the creditor for a fixed amount payable on a fixed date.
Example: suppose A buys goods from B, h may not pay B immediately instead give B a bill of exchange stating the amount of money owed and the time when A will settle the debt. Now, B is in need of money immediately, so he will present this bill to the bank for discounting. The bank will deduct its commission and pay B the present value of the bill. When the bill matures after the specified period, the bank will get payment from A.