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bank discOunt

Promissory note of the Bank is a bond, which can be presented for payment till due, which provides maintenance of current liquidity.

Promissory note of the Bank is a reliable support at getting credits and guarantees.

The other advantages of Promissory note of CB "FAMILY" Ltd. include simplicity and rapidity of operation processing, and also, due to the flexible interest policy of the Bank, the possibility of the Customer to choose most convenient sum and terms conditions of cash resources allocation

Bank discounts are an example of a bank charge that is made for payment of a note at some point prior to maturation. In some cases, the bank discount is applied at the time that the note or loan is extended, and is automatically deducted from the loan amount that is used to calculate the schedule of payments on the loan. This in effect means that the receiver of the loan simply repays the face value of the loan, and little or no interest.

Generally, banking institutions require compliance with a rigid set of qualifications in order for an individual or business to obtain a bank discount. One of the more common requirements for a bank discount is a solid record of previous financing with the institution. Prior repayment of loans that took place within the terms of the loan certainly influence consideration for the extension of a bank discount. If the past loan history shows no late payments and no complications with the loans, then the chances for receiving a bank discount are greatly improved.

The level of bank credit is also a factor as well. From this perspective, the eligibility for receiving a bank discount is impacted by the current assets and liabilities of the borrower. If there is a high credit rating and it is easy to demonstrate that there is a healthy difference between assets held and outstanding balances owed, the chances for obtaining a bank discount are enhanced a great deal.

The underlying purpose of a bank discount is to reward individuals and businesses for practicing excellent financial management. Because these types of customers are considered to be such good credit risks, the bank can afford to extend a bank discount, with the expectation of being able to do business with the borrower in future projects. Along with the ongoing business relationship, there is also the good word of mouth that is generated for the bank. Happy customers tend to promote the bank to acquaintances, which may also help the bank to indirectly build a larger base of depositors and customers.

Of course, it is important to note that a bank discount can be revoked. This could happen during the course of the loan. Should the borrower fail to make a payment, or becomes unable to continue to make payments, then there is a good chance that the bank discount would be applied to the remaining balance. From this perspective, borrowers want to continue to make payments in a timely manner for the duration of the loan, in order to maintain the bank discount.


It is common for lBank Discount:

1) Bank discount (D)

2) Maturity value of loan (S)

3) Discount rate (d)

4) Time (t)

5) D = Sdt


A. Formula for bank discount: D = Sdt
1. Solve for D
2. Solve for S, d or t
B. Formula for proceeds: P = S - D

S=P/(1-dt)
C. Formula for maturity value:
D. Conversion of discount rate to interest rate and vice versa:
r=d/(1-dt)
E. Value of a promissory note at any point in time.

If Siti needs RM4000 now, how much should he borrow from his bank for 1.5 years at a 12% bank discount rate?

P= RM4000
d= 12%
t= 1.5years

P =S(1-dt),
4000=S(1-0.12x1.5)
S=4000/(1-0.12x1.5)

Siti should borrow RM4878.05 to get RM4000 as Proceeds.

compOuND InTEReSt fOrmula..

ORIGINAL PRINCIPAL= P
PERIODIC INTEREST RATE= i
NUMBER OF INTEREST PERIODS IN THE INVESTMENT PERIOD= n
FUTURE VALUE after n interest periods= S

When you place an initial amount P into an account, it is called the principal. In a compound interest account the following happens. The money in your account grows to an amount S after n periods. (The number n here identifies the number of periods your money stays in the account without any withdrawals, or deposits, except for interest payments at the end of each period.) The amount S is given by the compound interest formula

Start Investing Early and Compound Interest Will Work Hard for you
Start investing early and often. Time is a dimension that we have zero control over. You can start off by investing $20 a month when you’re 20, and will end up with more money than someone who started investing $100 a month when they’re 30. Money can be replicated, but time is irreplaceable.

Small amounts count. When I learned this equation in school, I believed the magic of compound interest only applied to large sums of money. I was wrong. $1 will compound as much as $100, provided that annual returns are equivalent. If you have $20 left over from your monthly budget, then re-invest the money so you can earn more money later.


S = P(1+i)n

In this formula, the interest rate per period is given by the quantity i. The formula should only be used when interest is compounded. Again, compounded means the interest is reinvested at the end of each period with no other deposits or withdrawals, Each interest payment deposited in your account then earns interest (rent from the bank) in the following periods.

Step1. Learn what compound interest is. Compound interest is interest paid on the principal loan or investment sum combined with interest on any outstanding interest incurred.
Step2. Gather some basic facts about the loan or investment you want to calculate compound interest for. You will need to know the principle amount you started with, the yearly rate of interest paid and the number of years you want to calculate the interest.
Step3. Use the formula S = P(1+i)^n where "S" equals the final result, "P" is the principle, "i" is the yearly interest rate and "n" is the number of years you want to figure the interest for.
Step4. Start by working the part of the formula in parenthesis. Add 1 to the yearly interest rate. Then, take that number to the power equal to the number of years you want to calculate the interest for. The power is calculated by taking the number times itself. For example, if you are figuring the interest over a 5 year period, you take the number times itself five times.
Step5. Take the result of the number in parenthesis and multiply it by the principle. The result is how much money will result from compound interest over the period of years you specified.
Step6. Try an example. To figure out how much money you will have in 5 years if you invest RM10,000 in a savings account that pays 3% interest, the formula would be S= 10,000(1 + .03)^5. 1 + .03 is 1.03 and 1.03 times itself 5 times is 1.1592. 10,000 times 1.1592 equals 11,592. So, after 5 years at 3% interest, RM10,000 becomes RM11,592.