Question

Mr. X accepted a bill of exchange of $Rs.1500$ drawn by Y and payable in $3$ months. He got it discounted from bank at $2$% discount. The discounting charges amounted to __________.

• A. $30$
• B. $25$
• C. $7.5$
• D. $22$

Answer 1

Answer: (A)

$30$

A bill is drawn by the drawer(debtor) on the drawee (creditor) so as to give him a sense of security for the receivables. But in case the drawer does not want to wait till the maturity period of the bill or rather he has some urgent need of funds, what he will do is get the bill discounted by a bank. When the bill is discounted by the bank, it pays the drawer an amount after deducting a certain percentage, because they are giving the drawer the funds he needs before the date of maturity of the bill and the discount is a type of fee for their service. So here in this case the amount of discount is calculated as follows:

Discount = $Rs.1500$ x $2/100$= $Rs.30$

Remember here the discount percentage is in not expressed as per annum so do not multiply it with the number of months.